Wall Street banks shifting “profits” from mortgage bonds into natural resources

by Neil Garfield

Wall Street banks know all about leveraging. They need to bring back the huge quantity of money they stole from the U.S. economy that they have secreted around the world (without paying a dime in taxes). The strategy they adopted was to bring the money from the shadow banking sector into the real banking world by "investing" in natural resources. The reason for the choice is obvious --- high demand for the raw materials, high liquidity in the marketplace for both the products and the futures and related contracts for "trading profits" (like the "trading profits they created with investor money in the mortgage bond market before any loans were made), and an opportunity for virtually unlimited "leverage" where they could control prices and bet against the very same investments they were selling to their customers.

The leverage comes from a primary investment in the warehousing and transport of raw materials and secondarily taking positions in the ownership of natural resources. This allows them to manipulate the cost of raw materials --- like copper and aluminum (see articles below), manipulate the politics in our country so that infrastructure repairs and rebuilding is out off until there is a tragedy of a large collapsing bridge killing thousands, and manipulate the bidding process for natural resources (like the Iraq and Afghanistan wars) so that there is a level of panic that causes the nation to send ten times the price of rebuilding now. The natural resources market is basically the only game they can play because it is the only marketplace that is large enough to absorb trillions of dollars stolen from Americans and people all over the world in the securitization scam.

Just as securitization was an illusion, making the base investment (mortgage loans) non existent at the same moment they were created or acquired, so will be the exotic investment vehicles now being prepared for both institutional and ordinary investors that will cover the multiple sales of the same bundle of commodities. Here we go again! Another boom and bust.

Tue, Aug 13

CFTC subpoenas metal warehouse companies • The Commodity Futures Trading Commission has reportedly subpoenaed Goldman Sachs (GS), JPMorgan (JPM), Glencore Xstrata (GLCNF.PK) and their subsidiaries for documents relating to warehouses they operate for aluminum and other metals. • The agency has requested information dating back to January 2010; it also wants documents relevant to the companies' relationships with the London Metals Exchange. • The CFTC's investigation follows allegations that the activities of warehousing companies have artificially boosted the price of metals, particularly aluminum. • Earlier speculation said the CFTC had sent subpoenas to an unnamed metals warehousing firm.

Full Story: http://seekingalpha.com/currents/post/1216972?source=ipadportfolioapp

So you found my note.. Really?

What happens when you Prosper a note



There are two issues when the other side presents original documents. First is that they say these are originals and they do not accompany it with an affidavit from someone with actual personal knowledge of the transactions or the high bar for business records exceptions to hearsay. My experience is that 50-50, the documents are original or fabricated by use of Photoshop and a laser printer or dot matrix printer. So what you need to do is to go down to the clerk’s office and see what they filed. It would not be unusual for them to file a copy saying it was the original. Second, on that same point, the original can be examined. When the signatures are heavy there should be indentations on the back. Also a notary stamp tends to bleed through the paper to the back.
The second major point is the issue of holder v owner. The owner of the debt is entitled to the ultimate relief, not the note-holder unless the other side fails to object. So along with the proffering of the “originals” they must tell the story, using competent foundation testimony, how they came into possession of the note. In discovery this is done by asking to see proof of payment and proof of loss. Which is to say that you want to see the canceled check or wire transfer receipt that paid for the “transaction” in which the possessor of the note became a holder under UCC and is entitled to a rebuttable presumption that they are the owner. If there is no transaction for value, then the note was not negotiated under the terms of the UCC.
Since they possess the note there is a hairline allowance that they may sue for the collection on a note in which they have no financial sake but there is no ability to win if the borrower denies they received the money or that the possessor of the note obtained the note for purposes of litigation and is not the creditor — i.e., the party who could properly submit a credit bid at auction by a creditor as defined by Florida statutes, nor are they able to execute a satisfaction of mortgage because even upon the receipt of the money they have no loss, and under the terms of the note itself the overpayment is due back to the borrower. And just as importantly, they cannot modify the mortgage so any submission to them for modification is futile without them showing proof of payment, proof of loss and/or authority to speak for and represent the interests of an identified creditor.
An identified creditor is not merely a name but is a report of the name of the owner of the debt, the contact person and their contact information. Then you can contact the owner and ask for the balance and how it was computed. So the failure to identify the actual owner is interference with the borrower’s right to seek HAMP or HARP modifications — potentially a cause of action for intentional interference in the contractual relations of another (asserting that the note and mortgage incorporated existing law) or violation of statutory duties since the Dodd-Frank act includes all participants in the securitization scheme as servicers.
The key is the money trail because that is the actual transaction where money exchanged hands and it must be shown that the money trail leads from A to B to C etc. The documents would then be examined to see if they are in fact relating to the transaction or a particular leg of the chain.

If the documents don’t conform to the actual monetary transaction, then the documents are refuted as evidence of the debt or any right to enforce the debt. What we know is that in nearly all cases the documents at origination do NOT reflect the actual monetary transaction which means they (a) do not show the actual owner of the debt but rather a straw-man nominee for an undisclosed lender contrary to several provisions of the Truth in Lending Act. The same holds true for the false securitization” chain in which documents are fabricated to refer to transactions that never occurred — where there was a transfer of the debt on paper that was worthless because no transaction took place. One last thing on this is the issue of blank endorsements. There is widespread confusion between the requirements of the UCC and the requirements of the Pooling and Servicing Agreement. It is absolutely true that a blank endorsement on a negotiable instrument is valid and that the holder possesses all rights of a holder including the presumption (rebuttable) of ownership.

But hundreds of Judges have erred in stopping their inquiry there. Because the UCC says that the agreement of the parties is paramount to any provision of the act. So if the PSA says the endorsement and assignment must be in a particular form (recordable) made out to the trust and that no blank endorsements will be accepted, then the indorsement is an offer which cannot be accepted by the asset pool or the trustee for the asset pool because it would violate an express prohibition in the PSA. And that leads to the last point which is that a document calling itself an assignment is not irrefutable evidence of an actual transfer of the loan. If the assignee does not agree to take it, then the transaction is void.  None of the assignments I have seen have any joinder and acceptance by the trustee or anyone on behalf of the pool because nobody on the trustee level is willing to risk jail, even though Eric Holder now says he won’t prosecute those crimes. If you take the deposition of the trustee and ask for information concerning the trust account, they will get all squirrelly because there is no trust account on which the trustee is a signatory. If you ask them whether they accepted the assignment of a defaulted loan and if so, what was the basis for them doing so they will get even more nervous. And if you ask them specifically if they accepted the assignment which you attach to the interrogatory or which you show them at deposition, they will have to say that they did not execute any document accepting that assignment, and then they will be required to agree, when you point out the PSA provisions that no such assignment or endorsement would be valid

This comes as no surprise to anyone except those at the Fed

This comes as no surprise to anyone except those at the Fed. Bernanke and especially the New York Federal Reserve still have not caught up with the reality that the toxic bonds are worthless of worth less than they thought by a long shot. It also continues to confuse the issue of who actually owns the bonds, and therefore who owns the undivided shares of the loans in the pools that issued the Mortgage Backed Securities (MBS).
The essential reality is that the transfers required by law and the PSA in each deal were never made. The darker reality is that they couldn’t be made because the obligation was between the borrower and the investors as a group and not with the REMIC which by definition is a conduit.
Since the borrower received the loan from the investors, the obligation arises by operation of law to the investors. But the paperwork with the borrower says otherwise. And the paperwork with the investor sets forth the blueprint for transfer of the loans by “sale” from entities that could never own the obligations because the investors already owned the obligation. Transfers between intermediaries were meaningless and the marketplace is realizing this and refusing to put a “value” on this procedure.
And the reason for the defects in the paperwork is simply that if that the investors were properly identified as creditors from the beginning, the intermediaries would not have had the “opportunity” to claim the loans, sell and trade them under exotic instruments and put the MBS in their balance sheets as though they owned those assets when in fact they never did. And of course they never had a dime in the deal — they didn’t loan the money, they never bought the loan.
Actually the only intermediary that has any money in the deal is the servicer that was making payments even if it did not receive payments from the borrower.

The legal consequence of this mess is uncertain, not as to what the law requires, but whether the law will be applied. It is clear that the Fed is claiming ownership or control over the mortgage bonds and just as clear that without legal transfers of the loans, the bonds were backed by nothing.
That leaves the mortgage originator with the security and the obligation and possibly the note running to other entities. hence the obligation is owed to the investors, the note may be invalid because it was never made payable to any legal creditor and the security instruments secures a debt to the originator that does not exist.
And now from Zerohedge …

Is The Fed’s Balance Sheet Unwind About To Crash The Market, Again?

Submitted by Tyler Durden on 01/13/2012 – 01:58

AIG American International Group Bond China Exchange Traded Fund Failed Auction High Yield Investment Grade M2 New York Fed Reality Recession Recoupling Sovereigns

Almost six months ago we discussed the dramatic shifts that were about to occur (and indeed did occur) the last time the New York Fed tried to unwind the toxic AIG sludge that is more prosaically known as Maiden Lane II. At the time, the failure of a previous auction as dealers were unwilling to take up even modest sizes of the morose mortgage portfolio was the green light for a realization that even a small unwind of the Fed’s bloated balance sheet would not be tolerated by a deleveraging and unwilling-to-bear-risk-at-anything-like-a-supposed-market-rate trading community.
Today, we saw the first glimmerings of the same concerns as chatter of Goldman’s (and others) interest in some of the lurid loans sent credit reeling. As the WSJ reports, this meant the Fed had to quietly seek confirming bids (BWICs) from other market participants to judge whether Goldman’s bid offered value.
The discreteness of the enquiries sent ABX and CMBX (the credit derivative indices used to hedge many of these mortgage-backed securities) tumbling with ABX having its first down day since before Christmas and its largest drop in almost two months. The knock-on effect of the potential off-market (or perhaps more reality-based) pricing that Goldman is bidding this time can have (just as it did last time when the Fed halted the auction process as the market could not stand the supply) dramatic impacts as dealers seek efficient (and critically liquid) hedges for their worrisome inventories of junk.
The underperformance (and heavy volume) in HYG (the high-yield bond ETF we spend so much time discussing) since the new-year suggests one such hedging program (well timed and hidden by record start-of-year fund inflows from a clueless public which one would have thought would raise prices of the increasingly important bond ETF) as the market’s ramp of late is very reminiscent of the pre-auction-fail-and-crash we saw in late June, early July last year as credit markets awoke to the reality of their own balance sheet holes once again.