Reader Lisa N. pointed me to a troubling October 2010 press release by SolomonEdwardsGroup, a company that describes itself as a “national financial services consulting and staffing firm” about its remediation services for “significant loan documentation problems.” Alert readers will recognize that this is shortly after the robosiging scandal broke.
Here are the key parts of the press release:
SEG’s teams can also be rapidly deployed across the U.S., to help banks and servicers “scrub” files and determine which foreclosures may have been tainted by incorrect loan documentation and processing issues such as robo-signing….
For instance on a recent engagement, SEG quickly deployed a 25-person team to review a single-family loan portfolio containing 5,000 loans and within six weeks brought the portfolio into compliance with investor guidelines. During another recent engagement, SEG successfully completed the same type of project involving 20,000 single-family loans tainted by fraud allegations.
Needless to say, this sounds consistent to the charges we’ve heard from borrower attorneys and have even seen at trial: that of “tah dah” documents appearing suddenly in court that solved all the problems with the evidence presented. A not that unusual case occurred last week, in Kings County, New York, where in HSBC v. Sene, when the lawyers for the bank tried submitting two notes (borrower IOUs), the second attempting to remedy problems raised by the first one, each presented as the original. The judge not only ruled against the foreclosure but referred the case to the district attorney and the state attorney general.
Why the Failure to Convey Notes and Make Assignments Properly is Such a Big Deal in Mortgage Securitizations
Advanced students of “securitization fail” can skip to the next bold heading.
As we discussed in prior posts, there is considerable evidence of a widespread, perhaps pervasive, failure among the parties to mortgage securitizations to adhere to the terms of the contracts that created these deals. Specifically, they were required to transfer the notes (the borrower IOU) through multiple parties and get them to the securitization trust by a specified date. This process was laborious because each time, the note had to be signed (the term of art is “endorsed”) and the mortgage assigned (which confusingly is the lien against the home, although both professionals and laypeople often refer to the note + the mortgage, which are actually two separate instruments, as the mortgage).
While in the early days of the securitization industry, in he 1980s, it appears these procedures were adhered to, there is considerable evidence that they broke down over time.
These deviations are serious because the agreements that govern these deals, called pooling and servicing agreements, were carefully crafted to satisfy a number of legal requirements, including securities law, local real estate law, tax law (REMIC, for Real Estate Mortgage Investment Conduit, set forth as part of the 1986 Tax Reform Act), the Uniform Commercial Code, and trust law.
The PSA requires the note (the borrower IOU) to be endorsed (just like a check, signed by one party over to the next), showing the full chain of title. The minimum conveyance chain in recent vintage transactions is A (originator) => B (sponsor) => C (depositor) => D (trust).
The correct conveyance of the note is crucial, since the mortgage, which is actually the lien (this is often a cause of confusion, since in lay usage, “mortgage” refers to the the note + the lien, when they are separate instruments), is a mere accessory to the note. The lien can be enforced only by the proper note holder (the legalese is “real party of interest”). The investors in the mortgage securitization relied upon certifications by the trustee for the trust at and post closing that the trust did indeed have the assets that the investors were told it possessed.
The PSA also very clearly provided for an unbroken chain of assignments and transfers though the parties (the A-B-C-D or more cited above). The use of intermediary parties between the originator and the trust, with a “true sale” occurring at each step, was intended to create FDIC and bankruptcy remoteness. The investors (who are called the certificate holders in the PSA) did not want a creditor of a bankrupt originator to be able to seize notes back out of the trust.
Some PSAs allowed for each party to endorse in blank (as in each owner simply had to have an authorized party sign it), but the note still had to have endorsements by all the parties in the conveyance chain, while others stipulated that each endorsement had to be to the next party in the chain. However per NY trust law (and New York law was chosen in the vast majority of cases to govern the trust), the final endorsement had to be to the trust, not in blank.
The last bit, and this is the source of considerable tsuris, is that all the notes had to be conveyed to the trust by a date certain, usually 90 days after the closing of the deal or after an aggregation period. Only very limited exceptions were permitted. The reason was to conform with REMIC rules. As indicated, the overwhelming majority of trusts elected New York law to govern the trust because it is very well settled. But New York trust law is also unforgiving. Trusts can operate only as stipulated; any move that deviates from its instructions in its governing documents is deemed to be a “void act” and has no legal force.
Law professors Anna Gelpern and Adam Levitin have described PSAs not just as prototypical rigid contracts, but as “Frankenstein contracts” and “social suicide pacts.” Normally, if there is a significant deviation from a contract, the parties can use waivers, sometimes with penalties if one party looks to have behaved badly, to remedy the breach. But the use of New York trusts, the REMIC requirement of passivity, plus the way the relationship among the parties was set up (bad incentives for the servicers, demotivated trustees because they are indemnified by the servicer and have no reason to watch out of the investors, formal consent requirements among dispersed investors, when they sometimes have conflicting interests) make changing the PSA well nigh impossible.
To put it more simply: if notes were not conveyed to the trust in the stipulated time frame, it means that someone other than the trust has the right to foreclose, presumably one of the parties earlier in the securitization chain. But no one is willing to admit that since it would mean that investors had been sold what Adam Levitin has called “non-mortage backed securities.” There is no clean way for a party earlier in the securitization chain to foreclose and transfer the proceeds to the trust. So the trust HAS to be the one to make the foreclosure, at least in the minds of everyone involved with these deals, whether it actually is the right party or not.
How SolomonEdwards “Remediates” Problem Loans
I called SolomonEdwards to discuss its press release about “scrubbing” loan files and had two conversations totaling over 50 minutes with a partner in this business. What was disconcerting about this discussion what that despite his emphasis on how thorough SolomonEdwards is in inspecting loan files (its software allows it to flag hundreds of items on a file review) and how strict it is in managing conflicts (it has over 600 people working on OCC consent orders for a single bank but would never take an OCC engagement that would put it in the position of having to review its own work, which as Abigail Field, Michael Olenick and Francine McKenna have stressed, is taking place frequently), he seemed remarkably unaware of the differences between how you can handle a loan that a bank owns versus one that was supposed to be transferred to a trust pursuant to a PSA. When I asked specifically about whether their process was different for securitized loans versus bank owned loans, he said that there was not a great deal of differences. The partner did not refer to any of the issues discussed at length above, but instead mentioned investor guidelines and who the investors were. So it seems that they check the loan files to see whether they conformed with the representations and warranties made in the PSA (for instance, they also flag as irremediable all loans with interest rates that would have them be deemed predatory) but not the transfer and custody requirements.
SolomonEdwards apparently did and continues to do a lot of FDIC-related work, and my understanding is that a lot of procedures were developed to deal with the to transfer mortgages out of banks that had failed. Those are perfectly kosher with a non-securitized loan but you just can’t do that in a PSA context. For instance, many of these actions are tantamount to trying to transfer a defaulted loan into a REMIC trust. Not only is that a void act under New York trust law (it was never contemplated, hence the trust can’t do that) but also under REMIC, a trust cannot accept a non-performing asset (which is exactly what a dud loan is).
In fact, the SolomonEdwards conversations confirmed what we have inferred about the widespread failure of originators to convey notes to trusts properly. When I asked how they start a file review, the partner took time to stress that they often didn’t start with file reviews, that at the big volume originators, it was often a big process just to find where the loans were; “They don’t know where it is…they all have significant problems.” That should simply not be the case with a securitized loan. It is supposed to be with the trustee, either held by them or a custodian they hired (WaMu and Chase deals are an exception, they do allow for the originator to hold the notes). Trustees provided multiple certifications to the SEC that they DID have all the loans.
Similarly, while he did say that there were some loan files that could not be remediated, such as if the note was missing and the seller/servicer was bankrupt and “no longer exists.” (in fact, the example he used, Thornburg, is still around). The methods he said they used for remediation were troubling. For instance, he said if the seller/servicer were dead, they would not be able to get a replacement note (he referred to “replacement” several times, that if you went back through the assignments or the registrations in MERS to the various parties and get a “certified” copy). Notes are like checks, they are negotiable instruments. You can’t enforce a copy or use a copy to try to recreate an original. This is exactly the sort of activity that got the notorious DocX shuttered. Yet he seemed to think the use of a copy or a “replacement” adequate. But you can’t “replace” a note; it’s an original, and you need to have the borrower’s signature for it to be binding, and I can guarantee no one is getting borrowers to sign replacement notes.
Similarly, one thing that foreclosure defense attorneys have seen as a huge red flag of servicer chicanery is the use of allonges. An allonge is a separate piece of paper used for endorsements that is required by the Uniform Commercial Code to be “affixed” to the note and used for endorsements when there is no more space left on the note for signatures. Allonges were pretty much never seen until the robosigning scandal, since all the space on a note (meaning the back and the margins) can be used for endorsements.
But SolomonEdwards official said that they’ve been able to get copies of the note from the seller and have been able to “bring them forward with allonges that were re-executed.” When asked, he confirmed that they create allonges now that confirm with the transfers that they’ve found ought to have taken place, either via the PSA, MERS, or other routes. Again, in a securitized trust, that it tantamount to trying to transfer the note now and is not valid. When I pressed him on how they did that, how they got signatures from intermediary parties, he demurred and said, “I don’t want to give away too much of our secret sauce.”
He also discussed using lost note affidavits. That is permissible only on an exception basis; indeed, many deals limited how many lost note affidavits could be used. If a firm like SolomonEdwards is seeing more than a couple of missing notes on a deal, that means transfers did not happen and there is a much more fundamental problem with the securitization, potentially a contract formation failure (if no notes were transferred by the cutoff date, the trust was not formed).
The SolomonEdwards executive also made it clear that he regarded the mortgage assignments as more important than the note, which is backwards (the lien follows the note) and that they spent more time on getting them executed. He said that his firm found “missing” mortgage assignments (“they can’t be found”) to be common. Again, since the assignments had to be completed by the cutoff date, that means they are either making obviously invalid assignments, are deliberately making back-dated assignments (not kosher) or have a time machine. Yet he said there were “potentially some things that could be done with the MERS system” or “going back” and “rebuilding a title chain” to remedy these failings. We also asked if they had ever been the professional deponent on a foreclosure, since testimony is supposed to be provided by a party with personal knowledge (hearsay is not permitted) and if they were the ones who had remediated the files, they would presumably be required to testify if the borrower challenged the authenticity of documents submitted to the court. He said that had never come up.
In fact, these reviews sound like documentation theater. The partner stressed how through SolomonEdwards was and how they had software that allowed them to record up data items and capture whether a item was material or not material and then risk rate an entire loan file. They can look at up to 12000 variants (no typo) for the OCC reviews (how many they actually look at depends on the scope of the client engagement; the difference between the number of steps, as he called them, in the OCC reviews versus the typical bank engagement is because the OCC reviews include state law requirements. Needless to say, it’s a bit curious that routine forensic investigations do not include state law matters). He also stressed that they have senior teams working on these projects, 5 years average experience for the OCC work, more than that on bank work, and that on a normal engagement, they would typically spend 3 hours per file, but if a bank had serious documentation problems, it might take as long as 12 hours.
He said that a typical bank engagement would require looking at 100 to 150 items. For a 3 hour process, that’s less than two minutes an item (and remember, that includes the time to log their findings). But the reality is that there are really only 5-10 things you need to look at: Do you have an original note? Does it have all the endorsements that the PSA says it should have? Do the mortgage assignments correspond to the endorsements? Were they all completed on time?
These multi-hour investigations are fee-padding form over substance. But this sort of thing is perfect for the bank-defending OCC, since it would take someone pretty expert to penetrate the fiction that this exercise in counting trees was designed to miss the forest.
It was disconcerting to speak to someone who obviously thinks his firm is highly professional engaged in activities that include document fabrication, which is what creating allonges now amounts to. And the worst is I have no doubt SolomonEdwards is more careful than most firms in the industry. This confirms, as we have said repeatedly, that there was a massive failure in the industry to conform to the requirement of the legal agreements that it devised. And there is a very big business, now with a government seal of approval, in covering up that fact.
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Banking = Organized Crime
It is magical thinking to believe otherwise.
How much more evidence do we need?
“Rebuilding the chain of title” = fraud on the court
Are they really so clueless? Or do they not care??
Why should they care? How many banksters and other bad actors are behind bars?
Banking = Organized Crime Carla
Yep. Is that why illegal counterfeiting is not more prevalent because one can do it legally as a banker?
CARPENTER
v.
LONGAN.
C. 1873
The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.[*]
http://stopforeclosurefraud.com/2012/03/04/carpenter-v-longan-83-us-271-sup-court-the-note-and-mtg-are-inseparable-asmnt-of-the-note-carries-the-mtg-with-it-while-an-asmnt-of-the-latter-alone-is-a-nullity/
more cover-up from bushbama…
who promised transparency, oversight, accountability…
Yipes
This is pure dicta in a US Supreme Court case and involves completely different circumstances. Before citing a quotation from the case, one should read the case and understand it.
And, here the US Supreme Court was sitting as a territorial court. This case means NOTHING as precedent.
In this case, the borrower really got screwed. Go read it.
Do not cite it.
Now what is increasingly happening with JPMorgan Chase, is they are DENYING that the loan was securitized and they insist that they have foreclosure rights because they obtained the loan through the FDIC. So, now, we have a governmental agency providing cover-up to a financial instution and allowing for the theft of these homes.
Things are increasingly becoming surreal.
Chase Home Finance does the same thing using Fannie Mae. How do I know this? They did it to me.
You’re absolutely right and it’s going to get stranger, predictably stranger.
All the news on this site and others makes me want to take out a huge loan, buy a home and invest in the markets….not.
ever.
RICO
Yeah, but who’s going to prosecute? Crooked pornstachioed dandy Eric Holder? That would be like letting Fat Tony Salerno throw the book at the Five Families. DoJ is a cruel joke, and Holder makes Meese look like Cato the Elder.
Fer sure, Holder thinks the gov has authority to kill us with no due process. Everything slides downhill from there. I mean, if murder is legal, then what isn’t (when it comes to the gov). Kinda like when tricky Dick said “well, if the President does it, then it’s NOT illegal”.
“Crooked pornstachioed dandy Eric Holder?”
you made me laugh
@Yves
Thank you for this. Excellent.
Here is a “must listen” from last night’s NPR “The Story”, regarding the 2 state attorney’s who were fired in Florida last year. It’s the first half hour or so of the show. (i don’t know how to, or I would send it as a general link. Maybe someone can do that.):
http://thestory.org/archive/The_Story_3512.mp3/view
Obviously, SEG is playing the role here that Winston ‘The Wolf” Wolfe did in the gruesome movie Pulp Fiction. The Wolf, if you recall, was brought in to help clean up a bloody mess in a car after someone accidentally had their head blown off. Different crimes, similar purposes.
As a third party buyer with an IBANEZ clouded title who cannot sell the condos we developed let me say for the record:
The notes are long gone and never to be found again….and if the foreclosed upon homeowner has left the country this is an unfixable problem – SOLOMAN EDWARDS is just being paid blood $$ to create false docs
GLENN RUSSELL/BILL BLACK 2012 W/ YVES SMITH FOR US-AG
Since this post ties up everything with such a neat bow, I’m not surprised there are so few comments. What is there to say?
Of course, the absolute bestest part is that the banks will find a way to hand the bill from SolomonEdwards to the taxpayers, who will then not only lose their homes, but pay for the privilege. Too funny.
More doubling down from the current illegitimate regime.
i have repeatedly observed and stated that the PSA problems that we have identified are basically a non issue from their point of view…they believe and act as if this nonissue has been contained…and, unfortunately, it appears as if they are correct in their assessment.
i’m not sayin it’s right, at all, it’s just not getting their attention…because there is no enforcement whatsoever…
How can this information be used in private civil actions? I’m thinking to add an interrogatory to foreclosing entities asking whether the loan file has been scrubbed. Then follow up withe deposition questioning. Whether the court accords this evidence any weight is a different question whose answer undoubtedly depends on the individual judge.
PL,
Here’s the thing. Say the file HAS been scrubbed. SEG doesn’t even know how to scrub a file correctly (i.e. back date docs without leaving evidence, make forgeries, etc.)! It doesn’t matter. It can’t be done without breaking laws. And that’s what has blown my mind from the start. There shouldn’t be ANY securitized loans being foreclosed, or very few. The PSA is the prevailing document in terms of how the notes must be added to the trust, and nobody bothered to comply with the PSA’s. If any of the courts were actually concerned with adhering to the law, they’d be ruling that the trusts can’t foreclose on these loans. They have no legal standing, they never too possession, and its too late to fix.
So, if there are any foreclosure attorneys here, what is the response of the courts if this type of argument is presented (no valid assignment of note and/or mortgage to trust)? Do the judges say the hell with it, I say the servicer can foreclose anyways since the borrower has defaulted on a loan and we know he owes somebody, even if it isn’t the party on the other side of the courtroom? Let’s throw caution to the wind on the 5th Amendment over due process? I know civil liberties don’t seem to hold the same importance they once did, but we peasants kinda look to Lady Justice as our protector of last resort.
And Yves, I chuckled when you wrote about having the entire chain of endorsements on the note. How often does a note have ANY endorsements beyond the originator? Or are notes endorsed more often in states like NY with judicial foreclosures? Is it like the new trend for using allonges despite plenty of available whitespace on the notes (prohibited by law and should deem allonge to be inadmissable…… and just verified this is indeed true under NY law)?
typo in last sentence of first paragraph above
“they never took possession”
Christmas wish list — edit feature for posts
Sorry, PL. If my reading comprehension was above an elementary school level, I’d have picked up on your occupation. I apologize for any offense.
No worries LucyLulu. As an attorney representing a clients in foreclosure,I have found trial judges unswayed by chain of title arguments. During a recent foreclosure trial where I argued the trust had no standing because there was no evidence the alleged securitized trust exists(no PSA, public or private offering materials); and an allonge magically appeared at trial but did not contain endorsements to the securitized trust,the judge stated on the record:
“If you believe that the lending institution of successor lending institution is engaging in fraud then you need to talk to the District Attorney. That’s not what I do. What I do is decide in this case how much money is due. And you just indicated that you client’s defense is not going to be it was my twin sister who got the mortgage, it wasn’t me. It’s not that kind of case. It’s I think I owe a lessor amount. So I need to hear the why’s and the wherefores on both sides. It’s not a technical defense unless you think this bank is engaging in fraud. And again, that’s for the District Attorney or the US Attorney. That’s not me.”
That is what it’s like to defend a foreclosure action filed by a phantom trust and being heard by a judge who doesn’t seem to be concerned with the rule of law. The extent of his apathy was revealed when the judge did nothing after the servicer’s employee testified its attorney had had the promissory note since the 2007 even though the allonge contained an endorsement from 2010. The promissory note with endorsements and allonge were produced for the first time at trial. Here’s the testimony under my questioning:
Q. Good morning Mr. XXX. I’d like to turn your attention to the promissory note. Where is the original? (…) Where have they been from the time this action was instituted up until today?
A. I believe Counsel has had them.
Q. Since?
A. I’m not sure of the exact date that Counsel has had them, but pretty much as long as—from when GMAC was able to get them when the account—when the action started when they would have been sent to Counsel.
Q. So the action was commenced in September of 2007 and at that point you send the original promissory note to Counsel?
A. Well, like I said, I don’t know the exact date they were sent. I know that when it’s our—when a case is in litigation, such as this case, and we get the original document it will be sent to Counsel.
Q. Did the original promissory note ever come back to GMAC after it was sent to Counsel?
A. I’m not sure
Q. Okay. How could an allonge be executed from LaSalle Bank National as trustee to Bank of America in September of 2010 if Counsel had the original?
A. I can’t answer that. I don’t know if it was sent back and forth or what happened to it. I just know that Counsel has it today.”
So it’s perfectly fine for endorsements to appear like magic on allonges sitting in the trust’s attorney’s possession. The judge does not see any problem with that testimony. The foreclosure judgement of $141,000 on $52,000 promissory note is on appeal to Superior Court in Pennsylvania. Briefs have not been submitted yet.
P.S. following the above cited testimony, the trust’s attorney denied having possession of the promissory note and allonge. He contradicted his own witness on the record at trial and the judge did nothing.
PL thank you for the vivid picture of how the property fraud system is playing out on the ground, e.g., in the foreclosure proceedings in state court.
So if I understand correctly you have a judge who (1) doesn’t think a civil court has any jurisdiction over fraud issues, (2) either doesn’t grasp that fraudulent testimony and documents are being submitted (fraud on the court itself), and (3) sees “how much money is due” as the exclusive and narrow issue raised in a foreclosure case, despite reliable evidence that foreclosing plaintiff cannot prove the threshhold element of its case (standing!) without resorting to fraudulent evidence. And finally, issues a judgment for plaintiff in the amount you described.
Is it naive to wonder whether referring judge, attorney and witness to PA disciplinary committee would be a fool’s errand?
Good luck on the appeal. Kudos for being in the trenches and maintaining enough sanity to stay the course.
Ms. G.,
If PL returns, he can correct me if I’m wrong, but the judge understood the fraud. He graduated from law school which requires some degree of intelligence and this doesn’t take a whole lot. He didn’t see it as his problem, but a problem for somebody else to handle, the DA. Good luck on that one. I was given the same line by my state AG when I asked what his office planned to do with their share of the settlement money and if they had pursued any prosections to date. That it wasn’t their job, but the local DA’s. So, what exactly does their consumer fraud division do and how does it apply leverage on offending companies if they have a policy of no prosecutions? In other words, it was a bunch of bs (and I didn’t let the asst AG off the hook on it either, she was rather eager to get off the phone by the end).
PL,
That’s an incredible story and paints quite the picture of what a mockery mortgage records have become. Thanks for taking the time to post it. I’m going to send it to my sister. She practices international finance law but every so often I send her tidbits so she’s fairly clued in on the mortgage issues. I only wish I could get her to help out, but her plate is overflowing, on several fronts. Good luck on the appeal. Surely the appellate court won’t display equal disregard for basic debtor-creditor law issues????
I suspect the trial judge realized the documents were fraudulent but didn’t care because my client had signed a promissory note and and mortgage it doesn’t matter who forecloses on it. He is not unintelligent but he may be uninformed on some issues. At one point during the trial, the judge cut off my questioning about the assignment and said “We’re not here to figure out MERS, whatever that may be.” I have considered referring the transcript to the judicial disciplinary board but I suspect the appellate court will weigh in and that will be censure enough. As far as the trust’s attorney, he is little more than a debt collector who wants to win at any cost. He doesn’t appear to recognize the issues and is exposing his client to tremendous risks on appeal. GMAC’s witness testifies in cases around the country and signs affidavits as a “litigation analyst” but doesn’t display an understanding of the difference between assignments and endorsements. His affidavit was found incompetent by the NC appeals court in IN RE Gilbert. His testimony has cost many people their homes and more judges should read the NC decision.
This site really cleard my mind and gave understanding as to what really happen .It was layed out in plain english . I have been trying figure out what happen for five years.Sending off payments to a investor instead of a bank not getting monthy statements from a bank credit not building .So if the bank hve the mortgage how could the investor sale me the deed or tell me to make monthy payments to him .Would that deed be legal?
>>because there is no enforcement whatsoever…
by whom? Regulators? Attorney generals? Courts?
Think of going into the home of a messy to find the corpse. It’s dirty work but someone has to do it. And the OCC – they’re just the cop who sits in his cruiser at the curb watching the guys in white suits and gas masks carry out box after box of garbage and chuck them into dumpster. The guys in the white suits are SEG, I guess.
The crazy thing is if a person applies for a mortgage and makes a misrepresentation on the loan application (the “gift” from your parents was really a loan), it’s referred to as a “head shot” and can literally result in jail time.
Here we have law firms fabricating loan documents out of whole cloth and post-dating assignments.
Now, I’m sure justice has always been dual-track — a forgiving merciful prostitute-goddess for them, and a serpent-haired vengeful Fury for the rest of us. (Heaven help a 99%er who can’t afford to purchase Justice.) I suppose we have to hope the easier communication of the net will lead people to network their outrage and coordinate more successful efforts to enforce true justice against the 1%.
Lester Freemon almost took down CLay Davis with a “headshot” on his home
The Wire — we need another season. Fight fiction with fiction — Cynthia Kouril at firedoglake figured it out:
Plus I remember reading a comment here a ways back suggesting someone should foreclose on Dimon and Blankfein. Make up papers just like they do.
I believe the article was satire. The banks are NOT immunized from using fraudulent or forged documents in servicer suits brought by or against private parties. It only immunized the servicers against civil actions by the state AG’s.
Hey, if the guy was gonna let torturers and other war criminals go free; and let banksters who tanked the entire economy with their massive frauds go free… then what’s a little (or a lot of) forgery and fraud upon the court between friends?
Obama 2012!
Yes…. all one big circle jerk……600 robo-reviewers hired by Solomon, as hired by former OCC people (Promentory), as hired by B of A, which paid the lobbyists, to influence Washington, to oversee the OCC’s supervision and implementation of, the whole foreclosure review charade. Solomon better have some pretty good errors and omissions liability coverage.
It seems to me we need a process where-by the home can be foreclosed upon and the trust benefit. And while we need to ensure that clouded title does not result and that current home owners are not foreclosed upon, to simply let the home owners live in the home forever is not a just outcome. The process needs to understand that interests are not aligned, that the investors did not commit misdeeds, so the fines if rules were broken need to target the right party and not benefit the wrong party.
Many mortgagors are no more “wrong” than misled investors in worthless CDOs and RMBS. Borrowers with good credit were steered to sub prime loans designed to fail. It’s not so simple as saying the investors need to protected from defaulting mortgagors. Instead, both the investors and mortgagors need a solution that’s fair. I think the best solution is to force servicers to modify loans and investors to accept principle write downs. These steps will keep people in their homes and generate a viable stream of income to investorss. The way to force servicers to modify loans is for the courts to reject fraudulent assignments, notes, allonges and any foreclosure action where the real party in interest is not named in the complaint with supporting documents attached. Loans will be modified once servicers realize they cannot perpetuate fraudulent foreclosures.
C of C,
I agree. Litigation is definitely an inelegant and inefficient solution. And I’ve actually given the matter a fair amount of thought, but haven’t been able to come up with much better. It’s a royal mess. Any ideas?
In hindsight, I think Obama had an idea a while back. Dedicated foreclosure courts that are empowered to fast-track foreclosure proceedings. They could force banks to write down 2nd lien positions ahead of 1st liens ,throw out spurious borrower defenses and hold the banks and lawyers accountable. I think that’s a good place to start.
But what about people losing their homes? Are you not concerned about the large scale personal and social upheaval you are proposing? Once foreclosed, mortgagors have ruined credit and difficulty renting an apartment. Millions of foreclosures will result in angry mobs. Isn’t it better to modify the amounts owed and terms of notes so that some income is produced for investors while mortgagors stay in their current housing? If mortgagors don’t make payments on modified notes, then they truly cannot afford the property and foreclosure may be appropriate. Before reaching this point, however, mortgagors should get a second chance with just like bailed out banks.
Call that a conscience?
What part of “the banks are a government enforced usury for counterfeit money cartel” don’t you get?
And if you are a conservative do you claim the Bible as your authority? Then where are your calls for debt forgiveness and/or restitution for theft?
How do you deal with the documentation issue, as in lack of proper. We have contract law going back centuries governing how debt is collected and who is entitled to collect it. We also have a Constitution that says that property can’t be seized without due process. I can’t believe that lenders would have been so careless and lackadaisical with these notes and mortgages that were worth six figures, but they were. I believe it’s Adam Levitin who’s said that he’s yet to see a note that has been properly endorsed into a trust, and the law is very strict about how this is done, for very specific reasons, and that it must be done within 90 days (with few exceptions) of the closing of the trust. Nor from what I understand can laws be changed with retroactive effective dates. This is the part that hangs me up, though there may well be solutions I’m unaware of. Maybe it would help if I were a real lawyer instead of playing one on TV. :=)
Speeding up foreclosures isn’t going to cure fraudulent land records and polluted chains of title. There’s only two ways to go there: retroactive legislative action or case by case quiet title actions. Either cure will require harsh medicine.
I think fraudulent allonges may be cured by a modification agreement correcting errors regarding ownership of the note. While there may be a conflict between the promissory note owner on the modification agreement and the named owner on endorsements to the promissory note or allonge, if the borrower knowingly consents to it then the contract is reformed. The modification agreement will need to include a provision that the note owner agrees to defend and indemnify the borrower from claims by another party that it owns the promissory note.
What I’m proposing is cumbersome and costly, but surely less expensive in the long run than our current system of foreclosing and reselling property with hidden title defects. It also quarantines the currently affected parties, promissory note owner(s) and the borrower, and doesn’t infect unsuspecting REO buyers with “title fever.” That said, no cure is 100% and I’s sure there are permutations of title problems that could arise.
I’ve had the same idea as you, PL, about modification remedies, and my own opinion, from a common sense perspective, is that this would be the simplest and cheapest remedy in these cases. All parties are informed and consent, at least to the extent that all parties are known, and everybody should be winners. To a large extent, I think many of the problems have already been corrected in a similar manner through refi’s, though the borrower was ignorant of leverage he may have been able to use. There are also loans that were retained by banks that I’m guessing don’t have the same issues. That still leaves quite a few remaining. I don’t like the retroactive legislative idea personally, to me, that’s akin to a bailout. Perhaps we need some sort of streamlined process for ‘routine’ quiet titles, perhaps even non-judicial using clerks with special training, referring only contested or atypical cases to be heard by a judge? By George, I think we’ve solved the problem! Who should I call?
Yea they scrub the evidence that the banks are nothing but a bunch of thieves to help allow them to get away with stealing Homes and all the moneys that are going to foreignor pwned banks Why ? INVESTIGATION should be on High drive and take all invovled in the cover ups down even if very employee at the OCC gets fired and or sent to jail! Call your Staste reps Congress and Senaters. This is election year and the more they allow to have thier homes stolen out from under them the less likely they wil get votes from. Since the banks did make out from payer and the 2 ways securityies and notes sold then bail outs and tax deductions on top of selling the loans. No wonder they have so much to donate to political campaigns and Foreign Countrys.
The Secret Sauce
I vaguely remember reading once in some book by Carl Jung about a patient he described — a young man who was quite insane — whose malady presented itself as the delusion that every time he turned his head the world showed him a new postcard, in the form of whatever vista entered his vision, created for his amusement and pleasure.
In a certain sense, this derangement is a concentrated distillation of the pleasure the artistically sensitive take in the compositions, colors and forms their sight happens upon, and it hints at powers that, in healthy doses, underpin reasonably normal states of mind — a creative and self-referential narcissism, self-aggrandizement and the capacity to mount an artistic fusion of disparate phenomenon into a contiguous and holistic singularity. Wasn’t it Kurt Cobain who penned the line “Here we are now/entertain us”?
It seems this instinctive faculty is active in The Secret Sauce. And not only there. But in the entire apparatus of cash flows across the mortgage universe. It seems that everyone sees what they want to see to keep the cash flows flowing. Otherwise, the picture would be ugly indeed, a fantastic hairball that might be so choking that even the lawyers couldn’t extract their requisite fees, for who from? The heads have turned and the image on the postcard has formed and it’s nothing to worry about. It’s actually sort of pretty, if you just frame it with the right boundaries.LOL.
Too good.
To imagine, the generosity of this DARPA-internet, to offer a North American version of a Tupamaro identifier.
Everyone who posts here is wondering when the looting is going to stop and all that’s received in return is vague suggestions of prosecuting a sense of history ?
The tapped-out entitled are one with the Chinese re-educators.
The deposition transcript I’ve attached below describes how these “scrubbing” corporations function. There are untold numbers of these operations all across the country, picking up the pieces and working feverishly to put Humpty Dumpty back together again. The deponent’s endorsement mark appears on untold hundreds of millions of dollars in Countrywide notes all across this country, the files “scrubbed” to create just the whiff of legitimacy a court might require to examine before throwing an American family out in the street. I trust the full impact of the witness’ statements are appreciated, because they really are quite astonishing….
http://mattweidnerlaw.com/blog/2012/03/when-are-countrywide-notes-endorsed-a-filing-in-a-federal-case-shows-the-problems-with-negotiability/
How does Fannie Mae fit in with these stamped CW endorsements? Was FNMA’s part scrubbed and replaced with the double stamped endorsement? It claims to own loans, but I have never seen it named as the plaintiff filing a foreclosure suit. In my case BoA denies owning the note, but BAC says it does. Can a wholly owned subsidiary own something without the parent company owning it too? And at the same time FNMA says it owns it?
My purpose of this post is to put a face
behind the fraud. The motion (posted at Scribd) to
abandon LOAN ORIGINATION files in the
Alliance Bancorp Chapter 7 BK is
not cool. Way buried in the BK proceedings as
Docket Number 616. I let DOJ know about this and
all I hear is crickets.
http://www.scribd.com/doc/83275610/Abandonment-of-Alliance-Bancorp-Loan-Origination-Files
Why? Now all the evidence of
poor or no loan underwriting is GONE.
FYI: THe Alliance Bancorp 2007 OA1
Securitization Trust rated at first
AA now C with a 52 % Default rate- this
should raise red flags!
I am a Real Estate Broker in Northern California and I warn my buyers about buying REO. Phil Ting’s audit showed 46% of the examined foreclosures in SF to be void on their face. How can any responsible agent advise their client to buy an REO when there is a 46% chance they will not get good Title? I wish it were otherwise, I do see REO that would suit my clients…except for the risk. even a 5% risk would be excessive.Did I mention that the banks want you to use their captive Title Company and insurer? And that these new loans are being resold to Fannie and Freddie? Insanity.
Tom
It appears to me, safely not in the US and not in the buying a house in the US market, that there is NO secure, transparent, and legal real estate transactions being done in the US. Am I the only one thinking so? If the real estate legal system is broken, why should anyone “buy” a house?
Why are none of the big fish is in prison?
if I got caught doing something like this, I’d be arrested and thrown in jail
The American dream has been stolen from the us. It is the greed of . greedy bankers
Yves, the blogosphere often resembles a shrieking echo-chamber. But reporting like this confirms that you are doing absolutely excellent work, deep research, and penetrating analysis.
Thanks for all you’re doing. Everyone else who enjoys the thorough analysis should be donating.