Naked Capitalism: Alabama Judge Sides With Homeowners in Foreclosure Case, Based on Bank's Non-Compliance of PSA

In Alabama they do both judicial and non-judicial foreclosures, though primarily non-judicial (according to this site).

Naked Capitalism (4/1/2011) reports that a judge in Alabama overturned the foreclosure action "based on the failure of the trust to comply with the terms of the pooling & servicing agreement".

So it matters after all? At least in Alabama? That these TBTF national banks, as loan originator, aggregator, servicer, trustee of the REMIC and trustee of the trustee of the REMIC (usually their affiliated company or 100% subsidiary), cannot ignore the PSA that they themselves had created and supposedly signed, according to the law of New York State, and never bothered to follow by actually properly transferring all the mortgages with proper endorsement within the time-frame as specified in the PSA? Really? I mean really?

From Naked Capitalism (4/1/2011; emphasis added):

Alabama Judge Accepts New York Trust Theory, Dismisses Foreclosure Action for Failure to Comply With Pooling and Servicing Agreement

Paul Jackson has been forced to eat a bit of crow. A judge in Alabama in a case called Horace v. LaSalle overturned a foreclosure action based on the failure of the trust to comply with the terms of the pooling & servicing agreement. As you see, the judge ruled that the borrower can assert rights under the Pooling and Servicing agreement as a third party beneficiary and that he was “surprised to the point of astonishment” that the trust had not complied with the terms of its PSA.

The ruling in favor of the borrower endorses an argument we have made since last year on this blog, that the pooling and servicing agreement stipulated a specific set of transfers be undertaken to convey the borrower note (the IOU) to the securitization trust within a specified time frame. New York trust law was chosen to govern the trusts precisely because it is unforgiving; any act not specifically stipulated by the governing documents is deemed to be a “void act” and has no legal force. So if a the parties to a securitization failed to convey a note to the trust within the stipulated timetable, retroactive fixes don’t work. In this case, the note had been endorsed by the originator, Encore, but not by the later parties in the securitization chain as required in the pooling and servicing agreement.

See the order and more at the link.

I have no idea how the State AGs or the federal regulators are going to "fix" the mess which starts with loan origination and securitization to sale of the certificates to servicing to foreclosure process, all of which, as far I have figured, are null and void.

Here's the vid I made some time ago about the whole process and post on Youtube. There are still so many homes going to foreclosure, and in more than half the states (non-judicial states) homeowners, even if when they do know about the fraudulent securitization that could invalidate the foreclosure, don't have recourse unless they can afford to hire a real estate attorney (who may or may not know much about securitization).

I wanted to create the sequel to this video, explaining the foreclosure fraud part. But alas, Xtranormal decided to charge users to create the vid. Oh well.

Tweet

Foreclosuregate: Federal Regulators to Step In, Without Waiting for State AGs to Settle With Servicers

Taking a rare break from the Japan earthquake/tsunami/Fukushima I Nuke disaster coverage...

Since the State AGs cannot seem to get their act together to settle with the mortgage servicers (i.e. big commercial banks in the US) and sell out homeowners (see my March 7 post on that "progress"), the federal banking regulators are stepping in with their own solution, reports American Banker.

Turbo Timmy and Blackhawk Helicopter Ben to the rescue of their beloved TBTF Wall Street banks! Ta-dah!

How could the federal government step in, with uniform federal solution, to what's essentially a state affair? More than half the states have non-judicial foreclosures where the homeowners' rights and recourse that they would have in judicial states do not even exist.

Oh I forgot; it's not about the homeowners. They step in so that the banks can move forward.

Much like Japan's Nuclear and Industrial Safety Agency, whose raison d'etre is to "safeguard" the nuclear industry... (See my post, regarding this agency practically blackmailing Japanese with blackouts so that they don't deviate from "nuclear power is good for you" dogma.)

From American Banker on April Fools Day, 2011:

Regulators Ready Enforcement Orders Against Servicers as State AG Talks Stall

By Cheyenne Hopkins

WASHINGTON — Frustrated by the lack of progress with a global settlement between the 50 state attorneys general and the top mortgage servicers, federal banking regulators are expected to move forward with their own enforcement actions against 14 servicers as early as next week.

The cease and desist orders are expected to establish best practices for the servicing industry, including new documentation verification procedures, oversight from third parties and additional legal counsel, limitations for dual tracking foreclosures and modifications simultaneously, and a comprehensive look back to uncover prior mistakes.

(The article continues.)

Banks will win, there's no question. Toward the end of the article, I see this snippets:

But they soundly rejected the primary push from the AG proposal — principal reductions.

Speaking to reporters after a U.S. Chamber of Commerce event on Wednesday, JPMorgan Chase & Co.'s chairman and chief executive, Jamie Dimon, put it bluntly.

"Principal writedowns for people who couldn't pay their mortgages? Yeah, that's off the table," he said.

Well Mr. Dimon, how about the banks, including yours, who never properly transferred the mortgage they originated or bought into the securitization trusts which then issued RMBS to investors even if the trusts had no mortgages to back those RMBS? Oh I forgot. Naked short-selling is the TBTF banks' specialty. (How are JPM's silver positions doing, I wonder.)

Make sure you view my vid on foreclosuregate that tries to explain from the origination of the mortgage to foreclosure.

Tweet

State AGs Getting Almost Ready to Sell Homeowners Down the River on Foreclosuregate

(Also check out my April 1 post, about the federal regulators ready to come in to the rescue of TBTF banks... And see my vid on foreclosuregate!)

As Matt Taibbi said in his last piece in The Rolling Stone magazine, no one, absolutely no one in TBTF Wall Street banks goes to jail.

From Bloomberg (3/7/2011):

State attorneys general and federal officials hope to reach a final settlement with banks over their mortgage-servicing and foreclosure practices within two months, a person familiar with the negotiations said.

The officials, who submitted a 27-page settlement proposal last week to start negotiations, aim to reach an agreement with the banks in six weeks to two months, said the person, who didn’t want to be identified because the talks are private.

Oh great. They are cutting deals without telling us. What else?

Attorneys general are meeting today in Washington, where they are scheduled to get an update on the investigation into the mortgage-servicing practices of banks and the efforts to reach a settlement that could overhaul their procedures. The states began the probe last year after complaints that financial institutions submitted faulty paperwork in foreclosure cases.

Faulty? You mean FRAUDULENT.

Homeowner activists protested outside the meeting of the attorneys general, criticizing banks and demanding state and federal officials reach a tough settlement with the companies. They also called for criminal prosecutions.

So these state AGs are settling on behalf of ... exactly whom? It's decidedly not the homeowners who have been foreclosed fraudulently or are being foreclosed fraudulently. If they live in judicial states they may have some recourse. If they live in non-judicial states, everything conspires against them, including the court systems and attorneys, if they dare want to contest the fraudulent foreclosures.

Therefore, my conclusion is that the state AGs are settling for the banks, and give them the best deal they can come up with, at the further expense of homeowners.

No one goes to jail, not if you are bankers and politicians.

Tweet

J.P.Morgan Chase Fighting 10,000 Lawsuits

and $4.5 billion short on reserves to cover the litigation costs, according to the article on The Street yesterday (2/28/11).

The proceedings are the result of "faulty" (fraudulent would be the word) mortgage origination, securitization, servicing and foreclosure processes by the bank, who is the originator, securitizer, servicer, trustee of REMICs all in one, just like other TBTF Wall Street banks:

NEW YORK (TheStreet) -- JPMorgan Chase is a defendant in more than 10,000 legal proceedings and may be $4.5 billion short of reserves needed to cover those costs in a worst-case scenario, the firm said in a regulatory filing on Monday.

The New York-based bank's legal woes range from individual actions against JPMorgan Chase to class actions with "potentially millions" of litigants to "regulatory/government investigations." The suits include common law tort and contract claims, statutory antitrust claims, securities claims and consumer protection claims, the bank said in its 10-K filing with the Securities and Exchange Commission.

...In a conference call last month, JPMorgan CEO Jamie Dimon predicted that securitization lawsuits alone will be a long, difficult battle.

"It is going to be years before this plays out and this litigation is going to be fought almost securitization by securitization," Dimon said. "There is almost no other way to do it."

No kidding, Jamie. J.P.Morgan Chase has inherited the securitization done by Bear Stearns and Washington Mutual, as well as their own.

The article also mentions how the other TBTF banks are faring in terms of litigation reserves:

• Citigroup: $4 billion short

• Bank of America: $1.5 billion short

• Wells Fargo: $1.2 billion short

With J.P.Morgan Chase's $4.5 billion, the total reserve deficit for these four banks is $11.2 billion. Considering Wells Fargo got Wachovia and Bank of America got Countrywide, their reserve shortage look too small.

Particularly for Wells Fargo, as the bank is one of the 3, 4 banks that act as the trustee of REMICs that supposedly hold underlying mortgages. What are the duties and responsibilities of a REMIC trustee? Among others, it is supposed to verify and confirm that the mortgages are properly transferred to the REMIC within the time frame specified in the pooling and servicing agreement, and that the mortgages meet the standard set out in the agreement.

Tweet

Obama Busy Selling Out Troubled Homeowners to the Foreclosing Banks

Obama is pushing hard for a $20 billion "settlement" with the TBTF US banks so that these banks will be able to foreclose without inconvenient encumbrances like having to prove the ownership of the notes properly and timely endorsed and transferred. Never mind that almost all mortgages securitized in the last 10 years or so have been improperly transferred or not at all, and foreclosures have been done by entities with no standing to foreclose. Never mind that every single foreclosure-related documents may have been signed by so-called "robo-signers" who simultaneously work for all servicers in all states. And never mind that states and counties have been missing a significant chunk of revenues in recording fees (and it's not just MERS).


From Business Insider (2/23/2011):

The Obama administration wants to push through a massive settlement over mortgage-servicing breakdowns that could force the nation's biggest lenders to shell out more than $20 billion in fines, or to at least fund the same amount in loan modifications for troubled borrowers, the WSJ reports.

According to Reuters, the terms of the proposal, which would obviously require a commitment from the mortgage servicers themselves, have not yet been presented to the banks.

The White House hopes such a deal would allow the foreclosure process to start ramping up again.

Yeah Barry, good job, you've shown your true colors. Always help your biggest supporters. Just don't pretend it is for "working-class homeowners".

Tweet

Matt Taibbi: Why Isn't Wall Street in Jail?

The latest from Matt Taibbi:

Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.

"Everything's fucked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."

I put down my notebook. "Just that?"

"That's right," he said, signaling to the waitress for the check. "Everything's fucked up, and nobody goes to jail. You can end the piece right there."

Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.

Yup.

Ben Bernank's scheme to goose up the stock market is to benefit the top 5% of the population (including all these rich and famous people), while the most important asset (or what once was) for the middle class (or what's left of them) - homes - continues to fall in value.

Tweet

Wells Fargo Sues J.P.Morgan Chase for Mortgage Documents in REMIC

which, as the trustee of the REMIC, Wells Fargo should have verified when the trust was created.

Bloomberg reports:

JPMorgan Chase & Co.’s EMC Mortgage, facing homeowner lawsuits over foreclosures, was sued by the trustee of a mortgage portfolio for refusing to turn over documents detailing the quality of loans bought by the trust.

Wells Fargo & Co., the trustee, is seeking access to files for more than 2,000 underlying mortgages in the Bear Stearns Mortgage Funding Trust 2007-AR2, according to the complaint filed today in Delaware Chancery Court in Wilmington.

“The trustee has repeatedly requested that EMC provide access to the subject documents,” Wells Fargo said in the complaint. “EMC has played proverbial ‘rope a dope’ and otherwise continued to drag its feet, and has produced nothing.”

Rope a dope? Now that's funny. Isn't that how Wells, J.P.Morgan Chase, Bank of America, et al has been dealing with frustrated homeowners who try to save their homes over the past 2, 3 years?

According to the article, it was one of the suckers who complained to Wells Fargo after having bought a significant chunk of the certificates issued by this particular trust, under Wells Fargo's loving care. The certificates, or mortgage-backed securities, are most likely not backed by mortgages at all, if the industry practice of the past decade is followed.

An investor in the trust, who owns 42 percent of the outstanding face amount of the portfolio’s certificates, questioned the condition of underlying loans

, Wells Fargo said in the complaint, citing an August letter it received from David Grais, the investor’s attorney.

Grais, a partner at New York-based Grais & Ellsworth LLP, represents the federal Home Loan Banks of Seattle and San Francisco and Charles Schwab Corp. in litigation seeking to force banks including Bank of America Corp. and JPMorgan to repurchase mortgage-backed securities because they allegedly misrepresented the quality of the loans.

42 percent. Ouch.

As to the Bear Stearns Mortgage Funding Trust 2007-AR2, here's the last 10-D filing, in January 2008. The trust issued three classes of securities, A-1, 2, 3, B-1, 2, 3, 4, 5, B-IO, XP, R, R-X (the last three did not have initial certificate balance). The underlying mortgages are Alt-A, short-reset hybrid and/or negative amortization - in other words, junk.

Just out of curiosity, I checked to see if there's any info on the securities.

Here's one, A-1 (CUSIP 07401TAA4), as of August 20, 2008, by Standard & Poor loss assessment: Projected loss = 18.84%.

Here's another A-class, A-3 (CUSIP 07401TAC0), downgraded on August 19, 2009 by S&P from B to CCC, and put on a negative watch.

Tweet

More on Massachusetts Ruling on Foreclosure: Foreclosing Banks Sought Quiet Title

It's getting curiouser and curiouser.

It turns out that the two foreclosures that the court voided were just normal foreclosures in a non-judicial state. There was no involvement of the court, and the homeowners didn't even contest the foreclosures. That was 2007. Then, in 2008, the banks - US Bank and Wells Fargo, each acting as the trustee of a REMIC (Real Estate Mortgage Investment Conduit) who supposedly owned the mortgages - sought a quiet title judgment.

Now why would a bank want to do that, if the foreclosure was just as normal as any other?

And what is a quiet title?

An action to quiet title is a lawsuit filed to establish ownership of real property (land and buildings affixed to land). The plaintiff in a quiet title action seeks a court order that prevents the respondent from making any subsequent claim to the property. Quiet title actions are necessary because real estate may change hands often, and it is not always easy to determine who has title to the property.

A quiet title suit is also called a suit to remove a cloud. A cloud is any claim or potential claim to ownership of the property. The cloud can be a claim of full ownership of the property or a claim of partial ownership, such as a lien in an amount that does not exceed the value of the property. A title to real property is clouded if the plaintiff, as the buyer or recipient of real estate, might have to defend her full ownership of the property in court against some party in the future.

New York Times reports:

... The case dates to 2007, when Wells Fargo and U.S. Bancorp began foreclosure proceedings against delinquent borrowers on two separate properties. Neither borrower fought the proceedings — the courts in Massachusetts are not obligated to oversee foreclosures — and both banks quickly seized the properties.

The banks’ problems began in the fall of 2008, when Wells Fargo and U.S. Bancorp sought judgments from the Massachusetts Land Court that would have given them clear title to the properties. In 2009, the court rejected the banks’ arguments, ruling that the banks had not been assigned the mortgages before they foreclosed, as is required. Instead, the banks had acquired the mortgages after they had begun foreclosure proceedings.

According to the article, quoting the lawyer who represented one of the two homeowners, "U.S. Bancorp, as trustee, will either have to pay Mr. Ibanez to buy a deed from him, Mr. Collier said, or walk away from the property, leaving it to Mr. Ibanez."

Thus the question again: Why did US Bancorp and Wells Fargo seek a quiet title when no one was contesting the foreclosure? Their act of seeking a quiet title ended up opening a can of worms for them and they are going to lose the house or have to buy a deed from the homeowners. Who advised them to do so, particularly when the two banks now say they are not responsible for the proper transfer of the mortgages to the trusts for which they serve as the trustee and blame everything on the servicers?

One potentially funny thing is that those servicers could also well be themselves. Wells Fargo trustee service people blaming the Wells Fargo loan servicing people. (Oh wait, Wells Fargo has already done that, between the 1st mortgage people and the HELOC people.)

They should also know damn well that they are very much responsible; the Pooling and Servicing Agreements (PSAs) normally requires the trustee to make sure all the documents are in order, properly endorsed and properly, physically transferred to the trust.

Following the well-established protocol among MSMs reporting foreclosuregate/fraudclosure, NYT has to imply, by quoting "experts", that it is still a matter of "dot[ting] your i’s and cross your t’s" when it is really a matter of outright fraud to issue MBS without any M to back S.

The Massachusetts Supreme Judicial Court also rejected the banks' request to "make its ruling prospective, meaning that it would affect only new foreclosures. The court declined to do so, allowing foreclosure cases that have been completed to be reopened and brought under scrutiny."

Many, many mortgages that were securitized - subprime, Alt-A, prime, whatever the grade - were not transferred properly at the time of securitization. Many of them (I suspect almost all of them, actually) get transferred to the trust AFTER they are delinquent, and after the foreclosure proceedings have started. Good luck believing it is a matter of dotting the i's and crossing t's, and that it is only in Massachusetts.

Be sure to check out my vid, "Foreclosuregate Explained". (In the tiny screen in the right-hand column, or at Youtube.)

Tweet

Massachusetts (Non-Judicial State) Supreme Court Rules Against Foreclosing Banks Due to Faulty Securitization

Or I should say fraudulent securitization, where mortgage-backed securities were issued without any mortgage in the trust to back the securities. Naked shorting, in a sense.

Bank shares (Bank of America, Wells Fargo, US Bank, J.P.Morgan Chase, etc.) promptly headed south as soon as the news broke this morning, though they recovered much of the loss by the market close.

Reuters (among many others) reports:

NEW YORK (Reuters) - In a ruling that may affect foreclosures nationwide, Massachusetts' highest court voided the seizure of two homes by Wells Fargo & Co and US Bancorp after the banks failed to show they held the mortgages at the time they foreclosed.

And from Karl Denninger [emphasis is his]:

The banks tried to get constructive assignment (e.g. assignment by contract, even though the PSAs said otherwise - that actual assignment and delivery had to take place) recognized by the judge, and failed to produce evidence of actual assignment (because there wasn't any - the notes were originally endorsed in blank and there was no evidence of actual physical delivery to the trustee.) The Judge said no. That's what I was talking about earlier in this case - this has been the pattern and practice in these securitized loans, and the ASF and others in the industry have argued that despite language in the PSAs that required physical delivery they didn't have actually perform in that fashion to have a factually and legally-good transfer.

Yup. And the judge said no. Good for the judge.

I'm curious to see if PIMCO has any insight into the matter. PIMCO, as some of you may know, is loaded with MBS which it seems to have bought just so that it can stick them to the issuing banks. Only two days ago, PIMCO's Rod Dubitsky (Executive Vice President, Global Structured Finance Specialist) wrote a piece in yet another attempt by the big players and financial MSM to cast the whole foreclosuregate/fraudclosure as only moderate "flaws" that are easily fixable.

Calling a fraud a flaw doesn't make it a flaw.

But in many states, particularly the non-judicial states, foreclosures go on uncontested (no easy way for the homeowners to contest anyway), banks getting the homes that they probably don't have title to. Judges are asleep, attorneys either don't know or don't care.

Tweet

Randall Wray: Time to Audit REMICs!

Yes, those REMICs (Real Estate Mortgage Investment Conduits) that didn't have any mortgage to back their MBS, which therefore was "mortgage-unbacked securities".

Randall Wray, who's been writing extensively about mortgage origination - securitization - foreclosure fraud which he calls "the worst in human history", says it is time we audited the REMICs:

We now know that the “mortgage backed” securities were not backed by mortgages. In reality they are unsecured debt. The “pooling and servicing agreements” (PSAs) that govern securitization require that the mortgage documents (including the wet ink notes as well as a clean chain of title) are transferred in a timely manner to the trustees. This was rarely and perhaps never done, because it was counter to the recommendation made by MERS (Mortgage Electronic Registry System). Instead, notes were either destroyed or held by the servicers to speed the foreclosures that were always envisioned as the end result of the mortgage origination process. Not only does this practice render the securities fraudulent but it also violates the federal tax laws that govern the REMICs—meaning back taxes are due.

But worse than all that, by breaking the chain of title and by destruction of documents, MERS and the servicers have jeopardized the entire system of property rights. Most, perhaps all, foreclosures have been fraudulent, which means that resales of the homes are also frauds. It goes without saying that the original mortgages were frauds from the very beginning—to complete the transformation to the ownership society it was necessary to ensure that by construction, default was inevitable. Either the homeowner would be unable to pay, or the servicer would “lose” the payments. By obscuring the chain of title, it would be impossible for the debtors or the courts to sort things out. Separating home owners from their property was necessary to ensure that we can create Bush's ownership society. It is the modern form of the feudal foreclosures and seizures of peasant lands that concentrated ownership in the hands of agricultural capitalists—creating the first ownership society.

...It is time to push the reset button. All foreclosures should be stopped immediately. The REMIC trustees should be audited to see if they have properly followed the requirements of the PSAs and laws applying to REMICs. If they do not have the notes, the securities should be put back to the banks. If the banks cannot absorb the losses, they must be closed and resolved.

On a very thin trading today, banks who are servicers and/or trustees of a REMIC - Bank of America, J.P.Morgan Chase, Wells Fargo, Citi, Bank of New York, etc - are all up.

Tweet

Foreclosuregate Explained

as I see it...

Tweet

SEC Looking at Securitization Process in Mortgage Foreclosure Probe

About time, and therefore that means the feds are getting close to striking a deal with the banksters, legitimatizing everything they've done.

Reuters reports that the SEC has sent out a new round of subpoenas to Wall Street banks in its probe of mortgage/foreclosure fraud, and this time the regulators are looking at the very root of the fraud - securitization:

U.S. regulators have opened a new line of inquiry in their mortgage foreclosure probe and are asking big Wall Street banks about the beginning stages of mortgage securitization, two sources familiar with the probe said.

The Securities and Exchange Commission launched the new phase of its investigation by sending out a fresh round of subpoenas last week to big banks like Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co, Goldman Sachs Group Inc and Wells Fargo & Co, the sources said.

The SEC's subpoenas focus on the earliest stage of the mortgage securitization process, said the sources, who requested anonymity because the probe is not public.

The sources said the SEC is asking for information about the role of so-called "master servicers" -- specialized firms that oversee the selection and maintenance of the large pool of home loans that go into every mortgage-backed bond.

...One of the sources said the SEC is seeking information about the role banks had in mortgage securitization. The regulator is also looking at the role trustees for the trusts that issued the mortgage-backed securities had in monitoring the performance of the underlying loans.

"Master servicers" - read Bank of America, J.P.Morgan Chase, Wells Fargo, Citibank. Servicers are the ones who collects mortgage payments from the borrowers.

"Trustees of the trusts [REMIC]" - read Wells Fargo, US Bankcorp, Bank of New York Mellon, Deutschebank. Trustees of the REMICs are the ones who were supposed to verify all the necessary documents were properly transferred to the trusts.

Foreclosures in mostly judicial states have turned out to be the discovery process, as the homeowners and lawyers defending them have found out that their mortgages were never transferred properly to the REMICs, and the foreclosing parties (either the servicer or the trustee) do not have the legal standing in foreclosure.

Attorneys who have been trying to help homeowners in foreclosure will tell you that they've known for a long time that mortgages were never transferred to the REMIC, but that was business as usual for the industry and no one raised a stink about it.

And who bought the securities issued out of these trusts, which may have been issued without any backing? Banks, hedge funds, pension funds, mutual funds around the world. One of the largest holders of these securities - mortgage-backed securities - is the Federal Reserve under Ben "Bernank". The Fed has over $1 trillion of these MBS.

These banks have been telling us "Oh it's just minor document processing problems", precisely because it is not.

Tweet

Man Bites Dog, or Robosigner Sues Foreclosure Defense Attorney

St. Petersburg Times in Florida reported on 12/10/2010 Friday:

Nationwide Title Clearing, a Palm Harbor company at the center of the nation's robo-signing controversy, is going on the offensive against its critics.

On Wednesday, the company sued a St. Petersburg foreclosure defense lawyer, Matthew Weidner, for alleged libel and slander.

And it recently obtained an injunction, ordering Sarasota lawyer Christopher Forrest to remove videotaped depositions he had posted of three Nationwide Title employees describing an assembly-line process of signing mortgage-related documents.

The ACLU of Florida said Thursday that it has filed an emergency appeal of the injunction, which it called a "gag order" and a restraint of free speech.

The legal action marks another chapter in a storm over the validity of documents used to foreclose on millions of American homes. Earlier this fall, Bank of America and other lenders temporarily halted foreclosure proceedings because of evidence that many documents contained errors and fraudulent statements.

One of the most outspoken critics of the foreclosure process is Weidner, who writes a widely read blog in which he has criticized not only banks, but judges, lawyers and companies like Nationwide Title that process mortgage-related documents.

... In a suit filed in Pinellas-Pasco Circuit Court, the company says Weidner has "deliberately and maliciously" used the term robo-signers "to vilify NTC for signing documents … when (Weidner) knew that it is entirely legally and appropriate to do so."

The "gist" of statements on Weidner's blog, the suit says, is that Nationwide Title is an "unethical company" that manufactures false evidence used to foreclose. The statements have permanently damaged the company's reputation and subjected it to "public hatred, scorn and ridicule," according to the suit, which seeks damages in excess of $15,000.

ROTFLMAO! Nationwide Title's feeling is hurt! Poor thing!

Matt Weidner's blog is here.

Tweet

Denninger: You're Paying Your Mortgage - WHY?

so Karl Denninger at Market Ticker, who has been on top of the "foreclosuregate", asks, as he describes a lawsuit in Texas in which Bank of America is accused of trying to collect on the fully-paid mortgage.

I fully agree with his shouting and screaming in bold letters and capital letters. But alas, none of that matters in non-judicial states where even the real estate attorneys tell you to forget it (unless you are financially able to retain them), and it is unlikely to change any time soon. And the big national banks like Bank of America and J.P.Morgan Chase, acting as the loan servicer or the trustee of the mortgage trust, keep pocketing the houses that they have no title to, as government regulators look the other way.

Now, Denninger's shouting and screaming:

Now comes this lawsuit out of Texas alleging that Bank of America not only tried to collect on a PAID IN FULL mortgage but refused to listen to the fact that it had been paid in full and in fact threatened that the owners were "going to lose their home."

These banks all claim there is no "real problem" with securitization, there are no pernicious issues with paperwork not being in order, it's all on the up and up, yet we continue to see filings like this, and these filings - extreme measures, lawsuits even - come only after reasonable attempts to communicate with these institutions and resolve problems are met with STONEWALLING and games - even when, as is alleged here, there is evidence that the loan in question was paid in full and discharged!

Had enough yet?

This is all "minor paperwork errors" and "nobody has lost their home" (or been unjustly harassed, dunned and threatened for money they do not owe, right?)

AGAIN:

WHY ARE ANY OF YOU PAYING ANY OF THESE BANKS ANYTHING?

WHY ARE STATE REGULATORS AND ATTORNEYS GENERAL NOT FORCING ALL OF THESE LOANS THROUGH THE COURT SYSTEM AND MAKING THESE SO-CALLED ALLEGED "CREDITORS" COME TO COURT AND PROVE THE PROVENANCE OF THEIR CLAIMED "DEBTS" WITH A FULL AND UNBROKEN CHAIN OF ASSIGNMENTS?

HOW MANY MORE TIMES DO WE NEED TO SEE THIS BEFORE IT IS STOPPED?

THE ONLY WAY WE ARE GOING TO GET THESE INSTITUTIONS' ATTENTION, AND THAT OF THE LAWMAKERS AND LAW ENFORCEMENT BODIES IN THIS NATION, IS WHEN THE PEOPLE OF THIS COUNTRY REFUSE TO PAY ANY OF THESE BANKS ONE SINGLE DIME - OWED OR NOT - UNTIL ALL OF THIS CRAP STOPS AND EVERY ONE OF THESE "DEBTS" HAS ITS PROVENANCE PROVED UP IN A COURT OF LAW.

Tweet

Matt Taibbi on Foreclosuregate: MSNBC Interview

"Bernie Madoff went to jail because he ripped off rich people..."

Tweet

HR 3808 DEFEATED

HR 3808, which would have sanctioned the foreclosure fraud, was defeated today.

Yeas 185 (Dems 16, GOP 169)
Nays 235 (Dems 230, GOP 5)
No vote 13

Shame on you, Republicans (except 5).

5 Republicans who voted nay:

Djou (HI)
Heller (NV)
Jones (NC)
Paul (TX)
Rogers (MI)

Tweet

Underestimating the "Foreclosuregate"

With all the efforts by the Obama administration, HUD, the banksters themselves to try to gloss over those pesky minor document "errors" in foreclosures, the problem is bigger than they portray and more people are figuring that out, albeit painfully slowly.

Even a Congressional panel.

Politico has an article titled "Foreclosure missteps still a risk". (Note the words "missteps" and "still". Politico is doing its job of trying to undermine the gravity of the situation, by choosing such words.)

The nation's biggest banks may have foreclosed millions of homes in the US in the past few years without any legal standing to do so. If that is considered "missteps"instead of racketeering, then Bernie Madoff is the savviest investor and Warren Buffett should get the Medal of Freedom for having benefited from taxpayer bailout. (Oh he's getting that, isn't he?)

But despite the lightweight title, the Politico article says the Congressional Panel to oversee the Treasury Department's bank bailout is uneasy that this "foreclosuregate" is just the tip of a huge iceberg [Emphasis is mine]:

The Treasury Department may be overly optimistic in claiming that problems with home foreclosures have been contained and pose no threat to the U.S. financial system, according to a new report from a congressional watchdog commission.

The Congressional Oversight Panel set up to look over the Treasury Department’s rescue of the banking system said the foreclosure problems uncovered so far “may have concealed much deeper problems in the mortgage market that could potentially threaten financial stability and undermine the government’s efforts to mitigate the foreclosure crisis.”

... While some of those inquiries continue, officials from the Treasury and Housing and Urban Development departments quickly concluded that the foreclosure problems were fixable and did not constitute a threat to the overall financial system.

But critics haven’t been so quick to draw that conclusion. And the watchdog commission — under its chairman, Democrat Ted Kaufman, who just stepped down as a senator from Delaware — aligned itself with those who say that more needs to be known about how foreclosures are being conducted before an “all clear” can be issued.

While it’s possible the concerns are “overblown,” the commission’s report says “the worst-case scenario is considerably grimmer.”

“In this view, which has been articulated by academics and homeowner advocates, the “robo-signing” of affidavits served to cover up the fact that loan servicers cannot demonstrate the facts required to conduct a lawful foreclosure,” the report said. “In essence, banks may be unable to prove that they own the mortgage loans they claim to own.”

Well, how about that? And as I've been saying, banks, whether acting as loan servicers or trustees of the mortgage investment conduits, continue to foreclose with impunity in non-judicial states where they don't need to be bothered by the court.

The bigger problem is the fraudulent securitization of the mortgage loans. As it turns out, loans that were sold to the mortgage investment conduits were not actually "sold", as they were not properly transferred to the conduits. But these conduits sold mortgage backed securities (MBS) to investors telling them that the securities were backed by the mortgages in the conduits.

Then credit default swaps (CDS) were sold as protection for these MBSs, and collaterized debt obligations (CDO) were created out of these CDS and sold to investors. Then a new CDO was created out of these CDOs and sold to investors... All based on the assumption that these mortgage investment conduits did own the mortgages.

Well, the conduits, called REMICs, did not own the mortgages, as many foreclosure court cases in judicial states have revealed. The whole thing was a fraud.

The only way that it is any way "fixable" is for the government to ditch the rule of law, and write a new law to retroactively approve everything that banks did in loan inducement, loan securitization, and foreclosure.

And good luck even with that, as the real estate issues are the state issues, not federal.

The Politico article ends with this remark:

The fear is that uncertainty about the ownership of all mortgages could deal another blow to confidence in the housing market and cause home values to plunge again.

Well, if we do not get to the bottom of the problems in foreclosure documentation and loan securitization, and punish the bankers who committed fraud and politicians who sanctioned fraud, the home values will never recover.

Tweet

House to Vote on HR 3808 on Wednesday, Again

HR 3808 is BBAAAACCCCK. If you think the new Republican Congress is somehow different from the one that got ditched, well I'm sorry to reveal this news to you that not much has changed. It feels like we're trapped in somebody else's nightmare (I have a good idea as to whose nightmare), where bad things just keep coming at us over, and over, and over again.

Remember the sneaky effort by Congress to pass this bill right before the election, which would "require any Federal or State court to recognize any notarization made by a notary public licensed by a State other than the State where the court is located when such notarization occurs in or affects interstate commerce"?

They actually passed it, and presented it to the President to sign. But because so many people found about the bill and cried FOUL, our Prez had no choice but vetoed it, sort of, by not signing the bill.
.
Well, they are at it again, apparently trying to override the wimpy veto. House is set to vote on it on Wednesday.

To recap, the implication of this bill is this (from Zero Hedge article on 10/06/2010):

"... the legislation, if enacted, could protect bank and mortgage processors from liability for false or improperly prepared documents. In other words, with one simple signature Obama has the capacity to prevent tens of billions in damages to banks from legal fees, MBS deficiency claims, unwound sales, and to formally make what started this whole mess: Court Fraud perpetrated by banks, a legal act, and to finally trample over the constitution."

STOP THE FRAUD. Call your Congressmen and Senators.

Tweet

MERS Whitewash Bill Already in the Works, says CNBC

A bill that will legalize the fraud, in other words. And it may be passed during the lame duck session, says John Carney, senior editor at CNBC:

When Congress comes back into session next week, it may consider measures intended to bolster the legal status of a controversial bank owned electronic mortgage registration system that contains three out of every five mortgages in the country.

The system is known as MERS, the acronym for a private company called Mortgage Electronic Registry Systems. Set up by banks in the 1997, MERS is a system for tracking ownership of home loans as they move from mortgage originator through the financial pipeline to the trusts set up when mortgage securities are sold.

The system has come under scrutiny by critics who charge MERS with facilitating slipshod practices. Recently, lawyers have filed lawsuits claiming that banks owe states billions of dollars for mortgage recording fees they avoided by using MERS.

... Perhaps even more devastatingly, some critics say that sloppiness at MERS—which has just 40 full-time employees—may have botched chain of title for many mortgages. They say that MERS lacks standing to bring foreclosure actions, and the botched chain of title may cast doubts on whether anyone has clear enough ownership of some mortgages to foreclose on a defaulting borrower. The problems with MERS system led JPMorgan Chase [JPM 39.61 -0.41 (-1.02%) ] CEO Jamie Dimon to stop using MERS for foreclosures in 2008.

Now it appears that Congress may attempt to prevent any MERS meltdown from occurring. MERS is owned by all the biggest banks, and they certainly do not want it to be sunk by huge fines. Investors in mortgage-backed securities also do not want to see the value of their bonds sink because of doubts about the ownership of the underlying mortgages.

So it looks like the stage may be set for Congress to pass a bill that would limit MERS exposure on the recording fee issue and perhaps retroactively legitimate mortgage transfers conducted through MERS private database.

Self-styled consumer advocate Neil Garfield says the legislation is already being drafted:

After years of negative judicial decisions about the use of a straw-man on mortgages, MERS was about to lose its existence as well as its credibility. But now all of that is set to change as Wall Street money is pouring into the coffers of those who are receptive (i.e., almost everyone in Congress). The legislation is already being drafted under the interstate commerce clause to ratify MERS and everything it did retroactively. It appears that the Obama administration is ready to pardon all the securitization deviants by signing this bill into law. This information is corroborated by several people who are in sensitive positions — persons who would be the first to know such proposals. Fortunately, there are some people in Washington who have a conscience and do not want to see this happen.

Garfield is overstating things a bit. In truth, the results of the legal challenges to MERS have been mixed. But it is very plausible that the banks might want to put to rest any ongoing uncertainty about the legality of MERS. I wouldn't be at all surprised if Congress manages to pass a bill that bails MERS out of its legal issues.

Regulatory capture by the Wall Street banks is so complete that it won't surprise a bit if Congress passes this kind of bill and President Obama signs the bill into the law of the land, thus legitimizing FRAUD and PONZI to save the banks and big investors who bought MBS created out of numerous REMICs, which, thanks to MERS, may not have had any loans properly transferred to them.

In other words, these REMICs, set up by Fannie and Freddie and big Wall Street banks and managed by big Wall Street banks, may have "naked shorted" the securities, when there was no loan to supposedly "back" those securities. They simply hoped no one would notice, and that happy housing bubble would go on forever (until Goldman Sachs showed up with John Paulson).

Their plan during the housing bubble years, in retrospect, was to grow as big as possible so that when the proberbial sh_t hit the fan they would be protected as "Too Big To Fail" banks. Fraudulent mortgage inducement to suck in borrowers, fraudulent securitization and selling of securities with no backing, fraudulent foreclosures, they must have figured, would be all forgiven by the government because the mess would be so gigantic that the entire financial system would collapse. Just to make sure, the bankers stuffed their own people into key government agencies as well as hiring ex-government regulators.

So far, they have been absolutely correct, and their regulatory capture has been working like a charm.

If the captured Congress and the White House dare legitimize, retroactively to boot, a fraud operation like MERS, there go the financial markets. There goes the country, probably. Restore the trust and confidence in the markets? My a_s.

Instead of bankers hanging from the numerous lamp posts on Wall Street, we will see these bankers get away with theft - stealing homes from defaulting homeowners even though they don't have any legal standing to foreclose, but so what, if the government changes the law and legalizes fraud, they don't need to prove anything. Just as they had planned all along.

And we are told to blame "deadbeat" homeowners. Because, as Matt Taibbi said at the end of his latest article on 'Foreclosuregate',

Because in America, it's far more shameful to owe money than it is to steal it.

Tweet

Matt Taibbi on Foreclosuregate: Ready, Set, Fraud!

Matt Taibbi, who made Goldman Sachs almost a household name by comparing it to a "vampire squid", writes about what MSMs continue to ignore: 'Foreclosuregate'.

In the article for Rolling Stone Magazine, Taibbi reports on a day in a foreclosure "rocket docket" in Florida (judicial state, where foreclosures have to go through the court) where the presiding judge is determined to resolve 25 foreclosure cases PER HOUR, and shows us what other researchers (like William Black and Karl Denninger) have also shown us: The whole thing has been a one, gigantic FRAUD by the banks, from creating mortgage loans to securitization to foreclosures. All of it.

Worse, the court system is set up to assist the banks over and over again until they present the judge with a decent enough set of fraudulent papers. Then, good riddance, the judge decides in favor of the banks and they can take the house. Those judges in New York, who side with the homeowners, are rare exceptions.

And he also agrees with me, that we are conditioned to blame the "deadbeats", not the Wall Street banks.

From Rolling Stone Magazine:

The foreclosure lawyers down in Jacksonville had warned me, but I was skeptical. They told me the state of Florida had created a special super-high-speed housing court with a specific mandate to rubber-stamp the legally dicey foreclosures by corporate mortgage pushers like Deutsche Bank and JP Morgan Chase. This "rocket docket," as it is called in town, is presided over by retired judges who seem to have no clue about the insanely complex financial instruments they are ruling on — securitized mortgages and laby­rinthine derivative deals of a type that didn't even exist when most of them were active members of the bench. Their stated mission isn't to decide right and wrong, but to clear cases and blast human beings out of their homes with ultimate velocity. They certainly have no incentive to penetrate the profound criminal mysteries of the great American mortgage bubble of the 2000s, perhaps the most complex Ponzi scheme in human history — an epic mountain range of corporate fraud in which Wall Street megabanks conspired first to collect huge numbers of subprime mortgages, then to unload them on unsuspecting third parties like pensions, trade unions and insurance companies (and, ultimately, you and me, as taxpayers) in the guise of AAA-rated investments. Selling lead as gold, shit as Chanel No. 5, was the essence of the booming international fraud scheme that created most all of these now-failing home mortgages.

The rocket docket wasn't created to investigate any of that. It exists to launder the crime and bury the evidence by speeding thousands of fraudulent and predatory loans to the ends of their life cycles, so that the houses attached to them can be sold again with clean paperwork. The judges, in fact, openly admit that their primary mission is not justice but speed. One Jacksonville judge, the Honorable A.C. Soud, even told a local newspaper that his goal is to resolve 25 cases per hour. Given the way the system is rigged, that means His Honor could well be throwing one ass on the street every 2.4 minutes.

Foreclosure lawyers told me one other thing about the rocket docket. The hearings, they said, aren't exactly public. "The judges might give you a hard time about watching," one lawyer warned. "They're not exactly anxious for people to know about this stuff." Inwardly, I laughed at this — it sounded like typical activist paranoia. The notion that a judge would try to prevent any citizen, much less a member of the media, from watching an open civil hearing sounded ridiculous. Fucked-up as everyone knows the state of Florida is, it couldn't be that bad. It isn't Indonesia. Right?

Well, not quite. When I went to sit in on Judge Soud's courtroom in downtown Jacksonville, I was treated to an intimate, and at times breathtaking, education in the horror of the foreclosure crisis, which is rapidly emerging as the even scarier sequel to the financial meltdown of 2008: Invasion of the Home Snatchers II. In Las Vegas, one in 25 homes is now in foreclosure. In Fort Myers, Florida, one in 35. In September, lenders nationwide took over a rec­ord 102,134 properties; that same month, more than a third of all home sales were distressed properties. All told, some 820,000 Americans have already lost their homes this year, and another 1 million currently face foreclosure.

Throughout the mounting catastrophe, however, many Americans have been slow to comprehend the true nature of the mortgage disaster. They seemed to have grasped just two things about the crisis: One, a lot of people are getting their houses foreclosed on. Two, some of the banks doing the foreclosing seem to have misplaced their paperwork.

For most people, the former bit about homeowners not paying their damn bills is the important part, while the latter, about the sudden and strange inability of the world's biggest and wealthiest banks to keep proper records, is incidental. Just a little office sloppiness, and who cares? Those deadbeat homeowners still owe the money, right? "They had it coming to them," is how a bartender at the Jacksonville airport put it to me.

But in reality, it's the unpaid bills that are incidental and the lost paperwork that matters. It turns out that underneath that little iceberg tip of exposed evidence lies a fraud so gigantic that it literally cannot be contemplated by our leaders, for fear of admitting that our entire financial system is corrupted to its core — with our great banks and even our government coffers backed not by real wealth but by vast landfills of deceptively generated and essentially worthless mortgage-backed assets.

You've heard of Too Big to Fail — the foreclosure crisis is Too Big for Fraud. Think of the Bernie Madoff scam, only replicated tens of thousands of times over, infecting every corner of the financial universe. The underlying crime is so pervasive, we simply can't admit to it — and so we are working feverishly to rubber-stamp the problem away, in sordid little backrooms in cities like Jacksonville, behind doors that shouldn't be, but often are, closed.

About loan securitization:

Since these mortgage-backed securities paid much higher returns than other AAA investments like treasury notes or corporate bonds, the banks had no trouble attracting investors, foreign and domestic, from pension funds to insurance companies to trade unions. The demand was so great, in fact, that they often sold mortgages they didn't even have yet, prompting big warehouse lenders like Countrywide and New Century to rush out into the world to find more warm bodies to lend to.

In their extreme haste to get thousands and thousands of mortgages they could resell to the banks, the lenders committed an astonishing variety of fraud, from falsifying income statements to making grossly inflated appraisals to misrepresenting properties to home buyers. Most crucially, they gave tons and tons of credit to people who probably didn't deserve it, and why not? These fly-by-night mortgage companies weren't going to hold on to these loans, not even for 10 minutes. They were issuing this credit specifically to sell the loans off to the big banks right away, in furtherance of the larger scheme to dump fraudulent AAA-rated mortgage-backed securities on investors. If you had a pulse, they had a house to sell you.

As bad as Countrywide and all those lenders were, the banks that had sent them out to collect these crap loans were a hundred times worse. To sell the loans, the banks often dumped them into big tax-exempt buckets called REMICs, or Real Estate Mortgage Investment Conduits. Each one of these Enron-ish, offshore-like real estate trusts spelled out exactly what kinds of loans were supposed to be in the pool, when they were to be collected, and how they were to be managed. In order to both preserve their tax-exempt status and deserve their AAA ratings, each of the loans in the pool had to have certain characteristics. The loans couldn't already be in default or foreclosure at the time they were sold to investors. If they were advertised as nice, safe, fixed-rate mortgages, they couldn't turn out to be high-interest junk loans. And, on the most basic level, the loans had to actually exist. In other words, if the trust stipulated that all the loans had to be collected by August 2005, the bank couldn't still be sticking in mortgages months later.

Yet that's exactly what the banks did. In one case handled by Jacksonville Area Legal Aid, a homeowner refinanced her house in 2005 but almost immediately got into trouble, going into default in December of that year. Yet somehow, this woman's loan was placed into a trust called Home Equity Loan Trust Series AE 2005-HE5 in January 2006 — five months after the deadline for that particular trust. The loan was not only late, it was already in foreclosure — which means that, by definition, whoever the investors were in AE 2005-HE5 were getting shafted.

Why does stuff like this matter? Because when the banks put these pools together, they were telling their investors that they were putting their money into tidy collections of real, performing home loans. But frequently, the loans in the trust were complete shit. Or sometimes, the banks didn't even have all the loans they said they had. But the banks sold the securities based on these pools of mortgages as AAA-rated gold anyway.

In short, all of this was a scam — and that's why so many of these mortgages lack a true paper trail. Had these transfers been done legally, the actual mortgage note and detailed information about all of these transactions would have been passed from entity to entity each time the mortgage was sold. But in actual practice, the banks were often committing securities fraud (because many of the mortgages did not match the information in the prospectuses given to investors) and tax fraud (because the way the mortgages were collected and serviced often violated the strict procedures governing such investments). Having unloaded this diseased cargo onto their unsuspecting customers, the banks had no incentive to waste money keeping "proper" documentation of all these dubious transactions.

Please go to his Rolling Stone Magazine article, and read it. It is not the matter of 'deadbeat' homeowners who 'didn't deserve' it. It is the matter of Wall Street banks getting away again with probably the biggest fraud and ponzi, with the help of the government and the court system, again.

And for the unlucky homeowners in non-judicial states, there's no help. Not that I know of, short of declaring bankruptcy. Banks send them conflicting, fraudulent foreclosure papers, there is no public venue for the homeowners to contest them, and banks win by obtaining the houses that they LACK legit title to.

Tweet