Sub Committee Story Shell Game
3. June 2009 by Spiritual Patriot.
Testimony Before Sub Committee lays the story out short and sweet — TAX EVASION, LIABILITY SHELL GAME
It’s happening…. the word is spreading. Read this carefully. It has lots of good quotes for you to use. But the narrative on who owns the loan is wrong — the investor purchases a bond and a share of the loans. The SPV “Trust” owns nothing. It is a REMIC conduit which means there are no tax events under the Internal Revenue Code because it is under the statute a completely transparent nearly non-existent entity. MERS Tax Evasion Scheme- Testimony before Senate Banking Committee 2007
As thinly capitalized originators make more and more loans, claims against the lender accumulate, while the lender’s assets do not. The lending entities are used like a disposable filter: absorbing and deflecting origination claims and defenses until those claims and defenses render the business structure unusable.
As Professor Eggert has explained, this “churning” of capital “allows even an institution without a great amount of fixed capital to make a huge amount of loans, lending in a year much more money than it has.”
Other things being equal, the larger the loan, the higher the commissions, closing costs, and sale proceeds that a broker or originator earns. These simple facts create strong short term incentive for brokers and originators to cut corners in the underwriting process—creating a dangerous and sometimes fraudulent disparity between company policies and company practices. It also creates an incentive for brokers and originators to encourage consumers to borrow more money than they can afford. Moreover, brokers and originators in the current system have an incentive to put tremendous pressure on appraisers to appraise home values higher and higher in order to facilitate ill-advised loans.
Policy makers must come to terms with the notion that contemporary predatory mortgage lending is an economic artifice with two classes of casualties: consumers and investors. For this reason, proposals which create unlimited assignee liability may go too far by forcing relatively innocent investors to bear the brunt of large punitive damage awards.
Predatory lending strategists can use their advantage in managing litigation costs to hide from judicial scrutiny within large structured finance deals. Higher dispute resolution costs associated with securitization significantly corrode the substantive consumer protection rights cast by our existing law. The result has been that consumers have little or no competent legal advice on how to deal with unfair, unethical, and illegal treatment in the mortgage subprime lending industry. With no watchdogs on the beat, even well-meaning companies have gradually began to grow more, and more comfortable with questionable behavior simply to remain competitive.
In traditional two and three-party mortgage markets, consumers and their counsel had a clearer
idea of whom they were borrowing from and who might seek to foreclose upon them if they failed to repay. Service of process, interrogatories, depositions, and negotiations could be expected to involve only one company which was responsible for all, or nearly all, the relationship functions associated with the loan. In comparison, selling a loan into a contemporary structured finance conduit can force consumers to communicate with and litigate against many more business entities. Even simple litigation tasks, such as service of process and requests for production of documents, are much more complicated in structured finance.
The parties obtain two principal benefits from attempting to use MERS as a “mortgagee of record in nominee capacity.” First, under state secured credit laws, when a mortgage is assigned, the assignee must record the assignment with the county recording office, or risk losing priority vis-à-vis other creditors, buyers, or lienors. Most counties charge a fee to record the assignment, and use these fees to cover the cost of maintaining the real property records. Some counties also use recording fees to fund their court systems, legal aid organizations, or schools. In this respect, MERS’ role in acting as a mortgagee of record in nominee capacity is simply a tax evasion tool. By paying MERS a fee, the parties to a securitization lower their operating costs. The second advantage MERS offers its customers comes later when homeowners fall behind on their monthly payments. In addition to its document custodial role, and its tax evasive role, MERS also frequently attempts to bring home foreclosure proceedings in its own name.
While no one wishes to return to the two-party mortgage market where consumers had little access to home loans, the current system of lawless illusory underwriting is not satisfactory either.
The full weight of judicial sanctions against predatory commercial behavior should be born by the businesses and individuals that abet, conspire, or co-venture that behavior.
Filed under: CDO, CORRUPTION, Eviction, Investor, MODIFICATION, Mortgage, Servicer, foreclosure, securities fraud | Tagged: borrower, disclosure, foreclosure defense, foreclosure offense, fraud, Lender Liability, Mortgage, predatory lending, rescission, securitization, TILA audit, trustee | 1 Comment »
Mass Court Affirms Notice requirements, Holder in Due Course and raises New Issues on Auction Bids
Posted on May 28, 2009 by livinglies
Massachusetts is a power of sale state (non-judicial, but there is plenty of securitized meat in here for everyone). Good stuff to quote from — with Banks making the arguments that we are promoting on this Blog. The issues include (a) notice (b) unmarketable title and unable to get title title insurance (c) void certificate of title involving improper notice (d) non-competitive bidding resulting from cloud on title (e) redemption rights of borrower (f) securitization of loans (g) ownership of the mortgage (h) authority to pursue foreclosure (standing in non-judicial context) and most importantly identification of the actual holder in due course.
See Massachusetts Land Court Department Ruling by J Long
NY Times Says it All – Almost – Foreclosures: No End in sight
3. June 2009 by Spiritual Patriot.
NY Times Says it All – Almost – Foreclosures: No End in Sight
Posted on June 2, 2009 by livinglies
Editor’s Note: The opinionators at NY Times have it right in their description but wrong in their prescription. The reality is that nearly all securitized mortgage loans are worthless and unenforceable. The marketplace seems to know that — with “mortgage-backed securities” (that are not backed by anything in reality) selling at 3 cents on the dollar. Reality is that some 5 trillion dollars in equity was a lie. The executive branch can do little more than acknowledge that all the securitized loans were a bad idea (in practice, even if not in theory) and that the resulting “loans” were convoluted contracts barely resembling a loan, a mortgage, an obligation or a fair deal. Practically every basic black letter law component of the law contracts, the UCC, property law, banking, lending and business practices were routinely violated beyond recognition in a pattern of fraud, deceit and theft. And the conduct continues with the foreclosures where intermediaries with no stake in the outcome are initiating foreclosures regardless and happily ignorant of whether the true source of funding has been or will ever be paid.
The legislative branch need do nothing because the laws are already there along with hundreds of years of common law supporting the basic premise that if you loan a dollar you should get back a dollar plus interest. Until now, nobody ever conceived of the notion that if you loan a dollar, someone else can collect it. Until now, nobody conceived of the notion that if you loan a dollar and get paid by a third party, someone else can still collect it. The bottom line is that this was a fraud on the market — actually 2 frauds — once in the investment marketplace where investors bought bogus securities with bogus ratings and bogus insurance, and once in the real estate marketplace where consumers were duped into signing papers for bogus equity on bogus documents that violated the requirements of state and federal law.
The answer to this mess lies in the judiciary. The Courts are where the rubber meets the road. Where things like due process, standing, necessary and indispensable parties, and the hearing of cases on their merits is more important than procedural tricks that were never meant to apply to securitized lending.
June 2, 2009
Editorial
Foreclosures: No End in Sight
A continuing steep drop in home prices combined with rising unemployment is powering a new wave of foreclosures. Unfortunately, there’s little evidence, so far, that the Obama administration’s anti-foreclosure plan will be able to stop it.
The plan offers up to $75 billion in incentives to lenders to reduce loan payments for troubled borrowers. Since it went into effect in March, some 100,000 homeowners have been offered a modification, according to the Treasury Department, though a tally is not yet available on how many offers have been accepted.
That’s a slow start given the administration’s goal of preventing up to four million foreclosures. It is even more worrisome when one considers the size of the problem and the speed at which it is spreading. The Mortgage Bankers Association reported last week that in the first three months of the year, about 5.4 million mortgages were delinquent or in some stage of foreclosure.
Not all of those families will lose their homes. Some will find the money to catch up on their payments. Others will qualify for loan modifications that allow them to hang on. But as borrowers become more hard pressed, lenders — whose participation in the Obama plan is largely voluntary — may not be able or willing to keep up with the spiraling demand for relief.
One of the biggest problems is that the plan focuses almost entirely on lowering monthly payments. But overly onerous payments are only part of the problem. For 15.4 million “underwater” borrowers — those who owe more on their mortgages than their homes are worth — a lack of home equity puts them at risk of default, even if their monthly payments have been reduced. They have no cushion to fall back on in the event of a setback, like job loss or illness.
This page has long argued that a robust anti-foreclosure plan should directly address the plight of underwater homeowners by reducing the loans’ principal balance. That would restore some equity to borrowers — and give them a further incentive to hold on to their homes — in addition to lowering monthly payments. The mortgage industry has resisted this approach, and the Obama plan does not emphasize it.
With joblessness rising, lower monthly payments could quickly become unaffordable for many Americans. In a recent report, researchers at the Federal Reserve Bank of Boston argued that unemployment is driving foreclosures and to make a difference, anti-foreclosure policy should focus on helping unemployed homeowners. The report suggests a temporary program of loans or grants to help them pay their mortgages while they look for another job.
The government will also have to make far more aggressive efforts to create jobs. The federal stimulus plan will preserve and generate a few million jobs, but that will barely make a dent — in the overall economic crisis or the foreclosure disaster. Since the recession began in December 2007, nearly six million jobs have been lost, and millions more are bound to go missing before this downturn is over.
President Obama needs to put more effort and political capital into promoting the middle-class agenda that he outlined during the campaign, including a push for new jobs in new industries, expanded union membership and a fairer distribution of profits among shareholders, executives and employees.
There will be no recovery until there is a halt in the relentless rise in foreclosures. Foreclosures threaten millions of families with financial ruin. By driving prices down, they sap the wealth of all homeowners. They exacerbate bank losses, putting pressure on the still fragile financial system. Lower monthly payments are a balm, but they are no substitute for home equity. And until more Americans can find a good job and a steady paycheck, the number of foreclosures will continue to rise.
Filed under: CDO, CORRUPTION, Eviction, Investor, MODIFICATION, Mortgage, Servicer, foreclosure, securities fraud | Tagged: borrower, disclosure, foreclosure defense, fraud, Lender Liability, mortgage meltdown, predatory lending, securitization, TILA audit
Debbie, on June 2nd, 2009 at 6:28 pm Said:
Time for the Media to explain what’s been known for too long.
That most of these subprime loans and foreclosure are VOID.
And that the service providers and trusts, et al, are MANUFACTURING defaults in order to win BETS they placed on whether the borrower would default or not.
