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UncleNasty -> Conceived in Fraud - Helped by the FDIC (2/9/2010 1:10:15 PM)
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The issue of housing and mortgage problems has mostly fallen beneath the radar. But the layers of fraud continue, and continue to expand, and grow.
Below is a link to a 5 minute clip that holds up one example of how banks continue to be unjustly enriched at the expense of homeowners and taxpayers.
http://www.thinkbigworksmall.com/mypage/player/tbws/23087/1447720
There is no information regarding the legitimacy of the underlying foreclosure proceeding that was the cause of the above short sale. However, based on the recent actions of Fannie and Freddy, it is a pretty safe assumption that there was fraud involved in the origination of the loan. For those unaware of this F&F have begun auditing mortgages in their portfolios for problems in the underwriting - essentially looking for fraud and violations of Federal and state lending laws. WSJ ran an article relating to such in the past couple of weeks and I'm sure it can easily be located through a simple search.
Contained in every 300-500 page Pooling and Servicing Agreement (PSA [this is in essence the contract between the loan originator, the securitizer, the loan servicer, the trust and trustee, the investors]) I have reviewed is language to the effect of "If there are any problems in the underwriting, or violations of state and/or Federal lending laws, then we aren't gonna be stuck with them. You (the originator) gotta buy them back from us."
Interesting too is that foreclosures are not ebbing or slowing as many believe they are, or should be. The most recent data I've reviewed is in the Chicago area through a study complied by the Woodstock Institute. The meat of the study is expressed in the "Executive Summary" found on page 3 of the 34 page paper.
The data indicates, in my opinion, that the "banks" have already taken most of the available properties in lower income brackets and areas, mostly urban, and are now moving into the more middle and upper income outlying suburban areas.
The following link will open a PDF file of the study:
http://tiny.cc/HkD6I
While the initial wave of sub-prime foreclosures seems to have crested, we are still expecting a dramatic increase in foreclosures from other loan sectors, most notably the ALT-A and Option ARM sectors. Some of these have begun to "reset" but that number is still low. The peak of both of these is anticipated in mid 2011. It is also anticipated to drag conventional and prime sectors in tow as it builds to the peak.
Another area of foreclosures expected to grow in coming months is of people that can afford, and are still, making payments on their mortgages. Across the board home values have dropped considerably (this has a regional element but it is also true that almost all areas have reduced significantly), erasing any and all equity in many properties. The lack of economic/financial wisdom in continuing to pay on a note that is more than a property is worth is beginning to dawn on more borrowers. There is something of a small tide of these "underwater" homeowners that are simply walking away. As the ALT-A and Option ARM sectors deteriorate it is anticipated that more underwater homeowners will do this.
Another interesting bit of info came in the case of Deutsche v McRae, in New York. Those not familiar with judicial proceedings, specifically the ways foreclosures are being handled, will not recognize the significance of this decision. Allow me to opine, based on my readings of hundreds of cases and 2 years of deep research into the matter of foreclosures overall:
The court has said "The document you're putting in front of us now is one you just made up. It is a forged and fabricated piece of paper and doesn't reflect any transactions that have really occurred. So we're not gonna let you take these peoples house from them."
The decision contains the following quote:
"By way of the September 8, 2009 Order, this court previously determined that Plaintiff lacked standing, because it failed "to submit evidence of proper assignment/delivery of mortgage and note." Thereafter, Plaintiff submitted a second copy of the Note, which for the first time contained an endorsement by First Franklin, a Division of National City Bank of Indiana, to First [*4]Franklin Financial Corporation, and an endorsement in blank by First Franklin Financial Corporation. The endorsement in blank, however, is undated. In stark contrast, the copy of the Note attached to the complaint bears no such endorsements. Obviously, the endorsements were made in response to the September 8, 2009 Order, which post-date the commencement of this case (in January 2009), and are ineffective. [MERS v. Coakley, at 674; see also Kluge v. Fugazy, 145 AD2d 537 (2nd Dept. 1988) (absent assignment or delivery of the note, the assignment of the mortgage is a nullity)]. There being no evidence that the endorsements were made prior to the commencement of the action, Plaintiff failed to establish that it was in possession of the Note at the time it commenced this action." (emphasis added)
The entire decision is available through the New York State Law Reporting Bureau at the following link:
http://www.courts.state.ny.us/reporter/3dseries/2010/2010_20020.htm
What is tragic is that the fabrication of evidence happens in SO many foreclosure cases AND the majority of courts are either completely unaware, or they are aware and don't care. Significant in this New York decision is that while Plaintiff has been barred from this theft (a decidedly good thing) the court has not, and likely will not, initiate any investigations or prosecutions against the parties initiating unlawful foreclosure suits, fabricating and forging evidence to expedite both judicial and nonjudicial foreclosure cases, and the past, present and future grand theft Plaintiffs are involved in.
Lastly I want to make a few comments on the Federal programs started by both Bush (HOPE Now) and Obama (HAMP). Billions of dollars have been dedicated to "loan modifications." Yet the numbers of modifications attempted is dismally low, and the number of permanent modifications is even worse. Both programs, in my opinion, are doomed to fail, and have been nothing more than smoke screen providing an illusion something effective is going on.
Because the majority of loans made in the past decade have been "securitized" the alleged originating lender, often times the loan servicer, is no longer an owner or holder of the instruments (P-note and mortgage). As such they are no longer a party to the contract. The current owner and holder is the investor that has bought shares or certificates in the trust/pool. The identity of these investors is almost impossible to ascertain. Not that there is necessarily anything nefarious about that but without knowing who they are it is not possible to alter the terms of the contract.
The most basic of Contract Law 101 is that only the parties to a contract can alter the terms of that contract. Negotiation, mediation, arbitration.... Call it what you want. Only the parties to a contract can alter the terms of that contract. Period.
The servicer has no authority whatsoever to do such. Yet the programs of Bush and Obama rely on loan servicers to do exactly that - alter the terms of a contract to which they are no longer a party.
I really wonder how this most basic point of law has been completely missed by the literally thousands of people that have been involved in setting up both programs. I don't believe that is possible. Can you say "smokescreen" boys and girls?
Here is a link to current numbers relating to loan mods:
http://bailout.propublica.org/main/list/mortgage_servicers
It isn't over folks.
Uncle Nasty
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