Disgusting disclosures that our financial services industry and our foreclosure courts are corrupt and have perpetrated fraud on the American populace are everywhere.
In an October 17th article, David Dayen responds to Housing and Urban Development Secretary Shaun Donovan who, supporting the Obama Administration, opposes putting a national moratorium on foreclosures until fraud can be weeded out of the process.
Dayen says “it’s really interesting that he” (Secretary Donovan) “picks out the Cleveland area as his example of how we can’t stop what’s working in the housing market.” Dayen then provides examples of how the housing market doesn’t work in Cleveland:
“Michael and Pamella Negrea have never been late on a mortgage payment in the 15 years they’ve owned their home in Eastlake. But they’ve been foreclosed on three times.
“Martin and Kirsten Davis, meanwhile, lost their home in Cleveland to foreclosure two years ago. The reason: A mess that started when they accidentally paid 14 cents too little on their monthly payment.
“And Michael Rendes of Berea had his mortgage sold last year to Bank of America. The bank foreclosed on him in November, after insisting for months that it didn’t hold his loan and wouldn’t accept his payments.
“Tales like these portray the ugly side of the world of mortgage finance, a world embroiled in controversy amid claims of fraudulently signed foreclosure documents.”
In the examples given above, the lender charged Mr. and Mrs. Davis a $2,200 fee when the monthly payment was 14 cents short. As for the Bereas, no one notified them that their loan had been sold to Bank of America. They kept sending their payments to the original lender who never forwarded them.
Finally, a senior federal bank regulator directed major offenders (the too big to jail bunch strikes again) – J.P. Morgan Chase, Bank of America, HSBC, PNC Bank, U.S. Bank and Wells Fargo – to review their foreclosure procedures.
The word “lien” is used often in this article. To be clear: A lien is a legal claim on someone’s property and brings with it the legal right to keep or sell that property. It is security for a debt. Regarding mortgage loans, a lien is placed against the Deed of Trust to the property being purchased until the borrower pays the loan in full. The lien serves as the lender’s loan collateral – if the borrower doesn’t pay as agreed, the lender gets the property to offset any losses.
On November 22, 2009, I advised readers who might lose their homes to “get the foreclosing party into court and into discovery” to make them prove they were the lien holder. Make them provide evidence of lawful ownership of the property. In many instances, those doing the foreclosing cannot provide evidence.
If a little old lady knew this a year ago, where have the high-paid mainstream media business experts been hiding? Where are Bloomberg and Fox Business News when you need them? This potential mortgage fraud involves (as I calculate it) at least 62 million American mortgages. If the average mortgage loan outstanding is $150,000, multiply 62,000,000 by 150,000 to find the total dollars involved.
A major part of the foreclosure nightmare starts with a software program that registers property liens to a computer system called Mortgage Electronic Registration System (MERS). MERS serves as a document custodian. Thus, if ABC Mortgage Company makes the loan and takes the house as collateral against the loan, ABC’s lien against the house is registered to MERS, not to ABC Mortgage Company.
When ABC tells MERS it wants to foreclose on a property, the property is foreclosed in the MERS name, not that of ABC. MERS registers the lien in its own system naming itself lien holder, but it holds no financial interest in the property and uses outside “legal resources.” It was created by mortgage bankers to simplify the transferring of mortgage liens. It will ease your mind to know that Freddie and Fannie are part owners of the MERS system. MERS’s Legal services companies produce documents needed for foreclosure. It appears those documents often have forged signatures. One guy at a foreclosure mill “legal service” admitted to forging over 10,000 documents.
MERS forecloses on properties when a certifying officer registered with (not employed by) MERS tells it to foreclose – and MERS turns the request over to a “foreclosure mill.” Like magic, signatures appear on documents the lender didn’t sign. The legal services company kindly signed for the “certifying officer” who says “I hold the lien” – which may or may not be true.
By recording property liens in the MERS name, it is supposed to create a Trust – but does it? Courts now question whether this process of “securitization” creates legal ownership of anything. It asks the question: How can a legal Trust exist when the homeowner, a primary party responsible for payment to the Trust for property in the Trust (the home), is unaware the Trust exists?
Because of the MERS process, lawyers and property owners are no longer able to turn to the public recording system at your local County Clerk’s office to find the name of the property’s lien holder. Why? Because the name “MERS” appears on the document, not the name of the lender who made the mortgage loan.
MERS now forecloses nationally in its own name on liens belonging to mortgage lenders – even though it has no financial interest in the transaction. Because it’s just a computer system, MERS provides no customer service so consumers can’t call and ask why MERS is foreclosing on a property. You can’t work out payment arrangements with a computer system. Maybe you’re the beneficiary of a large inheritance, but won’t get it until next month. A sane lender would wait for you to get the inheritance and let you pay the past due loan payments. Until now, MERS, in theory if not in law, has remained an innocent proxy functioning on behalf of realtors and mortgage bankers.
Read your mortgage loan papers. Loan documents have for years given the loan originator the right to sell your loan. If they choose, they can sell your loan to Freddie or Fannie who can sell it to J.P. Morgan Chase or Citigroup or Bank of America or Goldman Sachs to be placed in a mortgage-backed derivative. At each sales point (when it’s sold to Freddie or Fannie, then to a brokerage firm to create a derivative), the lien holder of your mortgage may be registered as MERS. Your lender’s name may appear nowhere on the documentation as the real lien holder.
What does it mean to you?
First, here are two links that report glowing things about MERS – fair and balanced reporting. You need to read them, too. Article one (for homeowners).
However, regardless of what “they” say:
WARNING: If you are thinking of buying a home that was financed between 2004 and the current time, BE VERY CAREFUL. It may be a home whose legal ownership is yet to be determined by the Courts. If the word MERS appears on the property lien… well, I don’t give investment advice – but I’d walk away from it. It wouldn’t be fun to buy a new home and be evicted six months later because the Courts decide that the MERS securitization process is illegal and the original owners (two owners ago, maybe) still own the property.
Investigate your existing property’s chain of ownership evidence. Start by going here. Once you get the data, sleep with a copy under your pillow in case your local Sheriff shows up some night with eviction papers in his hand.
If your mortgage loan originated between 2004 and the current time, the lien filed against your home (and unless your mortgage loan is paid in full, there is a lien against it) may well be in MERS’ name, not your lender’s. Over half of all new residential mortgage loans in America are registered with MERS and are recorded in that name. And, if your home doesn’t have a mortgage, don’t feel too safe. Some people with no mortgage — some who never even had a mortgage — have been evicted from their homes.
Let’s say you financed a house in 2005. Your mortgage loan may have been sold by the lender to Freddie or Fannie who may have sold it to J.P. Morgan Chase or Citigroup or Bank of America or Goldman Sachs. Your mortgage may have been placed into a mortgage-backed derivative investment product sold by one of the too big to jail brokerage houses.
Investors all over the world are trying to reclaim their losses from mortgage-backed derivatives gone bad. They file suit against the brokerage house that sold the worthless derivative. The brokerage house (or insurance company) files suit against companies that sold them the mortgages in the worthless derivatives. Thus, your home on which the payments are current, may be foreclosed because foreign investors are suing brokers who created derivatives that got fried – and your mortgage was part of the package.
How did mortgage fraud of such national proportion happen – and why?
It was the early 1990s, after the U.S. Congress passed the Depository Institutions Deregulation and Monetary Control Act that helped America’s former mortgage lenders fail – you remember the savings and loans industry.
The mortgage lenders that replaced savings and loans wanted to evade title costs. They sought ways to bypass state and county registrations that normally identify and assign property title ownership.
There’s more to this story than Freddie and Fannie investing in a company called Mortgage Electronic Registration System (MERS) to speed things up and, for a fee, reduce land title costs. As stated in Part I, mortgage lenders and realtors decided they could profit greatly if a computer system operated a database to track ownership – and, as part of that process, have that computer system become the “mortgagee of record.” Foreclosure by proxy was born.
Why did it take so long to uncover all of this foreclosure corruption and fraud? Why did it take so long for us to hear the words ‘Mortgage Electronic Registration System’ (MERS)? Why did it take an entire industry so long to ask “Is securitization by proxy legal?”
MERS stands behind two or three giant corporate walls and people don’t know how to penetrate those walls to protect their property. They know they can’t afford to stay in court longer than their mortgage bank and possibly several other big, involved corporations with lawyers on staff. Because of the walls of lawyers ready to defend clients against whom it is difficult to prove criminal intent, MERS has successfully foreclosed without even producing original notes. It’s very difficult to defeat a faceless enemy.
To make things worse, under the MERS program almost any “certifying officer” can come to court, claim ownership of a lien, and proceed to foreclose. There are so many “certifying officers” at MERS, the courts have difficulty verifying whether the entity that shows up in court and claims ownership actually owns the lien on the property. Since MERS by-passes filing the actual name of the lien holder in public records, normal research sources are useless. I repeat: The “certifying officers” don’t work for MERS, they are merely registered on the computer system as “certifying officers.” Crazy, I know.
The actual holder of the mortgage (or a certifying officer that isn’t, but wants to become, the legally recognized lien holder) pays a fee and records the mortgage in the name of MERS. And, when asked, MERS forecloses, acting as proxy document custodian for the stated lien holder. But when mortgage loans have been leveraged so many times in the mortgage-backed derivative process, who knows who the actual lien holder is? Often, the courts do not. Even more often, innocent victims cannot fight their way through the mortgage industry’s walls of lawyers to protect themselves against unlawful foreclosure.
It’s important to understand this process because in its custodial/proxy status, MERS has been viewed as an investment trust. It has no customer service personnel. So if you or your lawyer ask MERS about “the trustee” – if it can be identified – you will likely be referred to the legal servicer, who will then direct you or your counsel back to MERS. Non-responsiveness, then, is used as leverage to intimidate and force homeowners out of their property.
This system appears to make the theft of private property acceptable. If it works with mortgages, it can be used for anything – maybe your pension fund. Nothing will be safe from the personal property mafia. Are mortgages merely a test case?
Another Massive Mortgage Fraud? Judge Reverses Himself After Hot Tub Meeting.
An interesting story published on October 9th by Washington Post Staff Writer Tom Jackman illustrates the breadth and depth of another kind of mortgage fraud.
Earlier in the year, District Judge Gerald Bruce Lee dismissed Bank of America as a defendant in a potential Northern Virginia real estate fraud case – and in November 2010, Judge Lee reversed his own decision.
In Virginia, 129 investors filed against Bank of America, and in North Carolina, 285 investors filed. Both filings were about the same fraudulent act – Bank of America, again. All shouted “foul” on lots they said had been over-valued by the appraiser. Here, mortgage fraud becomes an issue of unrealistic, overstated loan appraisals sanctioned – even encouraged – by mortgage lenders.
In 2006, the 414 investors claim they purchased overpriced vacant lots in North Carolina. They didn’t know they were overpriced because appraisals supported the $400,000 price. Appraisal fraud has become another major financial services industry problem. Investors were assured they could buy the lots with no money down, make no payment for two years, and in the meantime flip the properties for certain profit.
I’m not a fan of real estate flipping speculators. This case is a bit different because of the appraisals. Investors say the seller was buying the lots for $150,000, then reselling them for $300,000 or more. It somehow escapes the “victims’” notice that they planned to buy the lots and then do to another buyer what was done to them. Each of us deals with conscience in our own way.
The investors say their loss could not have occurred without the help of, in this case, Bank of America (notice how often that name comes up?). They charge that the seller of the lots and the bank colluded to inflate appraised property values.
“That’s where the hot tub comes in,” says the Washington Post, explaining the Judge’s decision to reverse his Decision. “In March 2010, after Lee’s ruling, a lawyer in the North Carolina case obtained more than 700 pages of e-mails that hadn’t been turned over in the Virginia case.”
The court records say a meeting was held to discuss the issue. The meeting took place in a hot tub so, with everyone presumably naked, no one could wear a wire. The e-mails showed a Bank of America loan officer discussing ‘recovery appraisals’ with the sellers of the property.
After the hot tub meeting, the emails were made available to the Court and Judge Lee reversed his earlier decision. The emails proved the seller, who wanted $380,000 for a lot, got a first appraisal via Bank of America for $210,000, then a second appraisal of $220,000. Suddenly, a third appraisal of $385,000 for the same lot appeared. Investors were unaware of the first two appraisals. After the real estate market tanked in 2008, the lots plunged to a value of $20,000 each.
“Lee also noted that Bank of America had obtained mortgage insurance for the loans, which could have provided the bank with a safety net – except that the insurance company later canceled many of the policies because of ‘misrepresentation’ by the bank,” the Washington Post article said.
Insurance, huh? Hmmmm… does anyone remember AIG? The Washington Post says “the insurance company later canceled many of the policies,” but that case is currently being litigated. It is yet to be decided. Maybe taxpayers will be bailing out another insurance company?
Judge Lee gave the Virginia plaintiffs permission to re-file their case against Bank of America with the new evidence, though he said “the issue of plausibility still remains. What did the bank have to gain by entering into fraudulent loans?”
Banks used to loan their deposits. Today, the concept of fractional reserve banking rules, not deposits. The more a bank loans, the more money it creates to lend. Deduct 10 percent (the reserve) from a loan, and the remainder is new money the bank can loan. A $385,000 loan minus $38,500 (10%) gives the bank $346,500 per loan at the almost zero Federal Reserve rate. Times 414 people borrowing for North Carolina lots, the bank lends $143.5 million at an interest rate of, say, 8 percent. That’s $11.5 million in loan interest per year. If the individual loans are only $150,000, the bank earns only $4.5 million (on $56 million, total). That’s why, Judge Lee.
How will the foreclosure fraud story end?
Many people think those who have faced unlawful foreclosure will get their homes back free and clear. After all, fraud was perpetrated. Though there is no doubt damage has been done to victims of unlawful foreclosures, the owners signed a mortgage loan. The loan is still a valid contract. When one signs a loan document, one is obligated to repay the loan. An unlawful foreclosure proceeding doesn’t change that hard, cold fact. Suing for damages is a different issue – a different lawsuit.
In MERS cases, evidence of the chain of ownership may have been broken. Because of the way property liens were handled, the courts may remove homes from the mortgage loan as collateral. The mortgage lender still has a valid loan, but may have lost the house as loan collateral.
If the home as collateral is removed from the loan, the FDIC’s auditors won’t give the lender much choice. Bank auditors will likely require the mortgage lender to call the loan, demanding payment in full.
Every loan agreement stipulates that lenders can call loans in full if conditions change that increase the lender’s risk. So, a new mortgage will be written and the collateral (the house) will be properly perfected this time. Because property values have fallen so drastically, the homeowner may be required to provide more collateral than just the house. And, if the borrower cannot so provide – it is legitimate grounds for foreclosure by the lender.
Could this be a sneaky way for banks to get those loans on which lien ownership cannot be determined because of the MERS and the mortgage-backed, over-leveraged derivatives mess properly re-assigned as collateral on mortgage loans?
For more in-depth information on MERS, written by Christopher Lewis Peterson, Quinney College of Law, University of Utah.
Has America’s financial services industry been totally and criminally corrupted?
I think the best description of how America’s economy is structured and how such a structure might allow fraudulent activities is contained in a series of three relatively short videos done by Damon Vrabel. He explains how the economy works in such understandable terms, I highly recommend viewing the videos. Here are links. Video one, Video two, and Video three. If you want to understand our economy, they are well worth your time! Bio.
The Obama Administration refused this week to support a national halt to foreclosures until the fraud can be identified, isolated, and dealt with in a lawful manner. Politicians aren’t interested in “Constitutional” and “Lawful.” Those cards – and several others – have been left out of the political deck, it appears.
President Obama’s spokesman, Housing and Urban Development (HUD) Secretary Shaun Donovan, said last week that mortgage fraud problems do not pose a “systemic” threat to the financial system.
What do his words really mean? What he is saying is that there is so much evidence the financial system accepts fraudulent acts as its norm, no threat is posed to the system by the fraud. HUD reviewed the “paperwork” problem to see if it posed a threat to banks. Excuse me, Mr. Donovan, but the threat posed is to Americans who have been victims of the foreclosure frauds. The banks that caused the problems be damned!
“We will not tolerate business as usual,” Secretary Donovan said. That sounds very much like a confession that “business as usual” is so unlawful, it has finally become intolerable.
On October 23rd, an expert I hold in high esteem, Professor William Black, University of Missouri, the senior regulator investigating the savings and loan crisis of the 1980s, declared that despite massive fraud by bankers, no one is being charged. He estimates the foreclosure crisis will cost about $10 trillion – yes, trillion with a “t.”
Black said “This is a crisis that we know empirically involved millions of fraudulent mortgages being made. We know that the losses are out there. We know that the industry extorted FASB to gimmick the accounting rules, so they didn’t have to recognize the losses. We know that the Fed has huge positions as collateral in these fraudulent mortgages. We’ve seen the Fed, Ambac, Fannie, Freddie, Pimco, Blackrock – all putting back after investigating tens of billions of dollars of mortgages and saying, these were sold under false representations and warranties – frauds and absolutely no one has gone to jail for it.” (Note: FASB means Financial Accounting Standards Board.)
Professor Black points out that in the savings and loan debacle (which he notes is perhaps 1/40th the size of current mortgage fraud), they got over a thousand priority felony convictions of the elites – not bank tellers, “elites.”
The Mortgage Bankers Association defines mortgage fraud thus:
“Mortgage fraud is defined as material misrepresentation – intentionally providing false information to deceive or mislead a lender into extending credit beyond the limits of what would normally be extended if the facts were known. Information or documentation is considered false if there is clear and convincing data that the information or documentation lacks truth or accuracy.”
According to this definition, lenders, not people unlawfully foreclosed on, are the victims! This says mortgage fraud occurs when consumers who want mortgages lie to lenders on loan applications. That’s true – but it’s only about 1/10th of the story. How many of the examples given in Parts I and II of this article involve liar loans? None. The MBA definition of mortgage fraud covers the backsides of those companies who made liar loans to sell to Wall Street brokers so they could create worthless derivatives that have bankrupted the world.
This is the government your tax dollars supports.
Professor Black states that “the FBI formed a partnership with the Mortgage Bankers Association, the trade association of the perps.”
Could that be true? Is the FBI in bed with the MBA?
The FBI Web site in March 2007 said “Today the FBI and the Mortgage Bankers Association (MBA) entered into an agreement to combat Mortgage Fraud. The FBI and the MBA will make available a Mortgage Fraud Warning Notice as a proactive means of educating consumers and mortgage-lending professionals of the penalties and consequences of this criminal activity.” As I read those words, The Mortgage Fraud Warning Notice told borrowers they would be guilty of mortgage fraud if they lied when applying for a loan — as people did (and were encouraged to do) when applying for liar loans.
Question to the FBI: Where is your Warning Notice to mortgage lenders who create a computer system that acts as a lien holder by proxy and destroys the reliability of our property registration recording system – and unlawfully forecloses against homeowners?
It is impossible that the MBA and the FBI did not know about MERS. It is impossible the reports of consumer foreclosure abuse did not reach desks at both organizations. It is impossible that complaints about unlawful foreclosures did not reach the desks of Congressmen and Senators from those unlawfully foreclosed. So much for the law and “representation.”
Many readers will recall the articles I wrote about how the State of Wisconsin filed fraudulent charges against Ambassador Lee/Leo Emil Wanta for a civil income tax assessment. I have written about the abuses heaped on the head of this American Patriot by the FBI and other intelligence agencies for which Lee Wanta once worked. He won’t play their dirty games. He won’t compromise his beliefs to get $4.5 trillion of his own money that in 2006 was wired to him by the People’s Bank of China when he sold personal business interests overseas. The funds were wired – in compliance with a Decision made by Judge Gerald Bruce Lee – to Bank of America in Richmond, Virginia. Yes, that’s the same Judge named in Article II of this series whose court records involve a hot tub meeting. Yes, it’s the same Bank of America against which investors have filed charges for loan appraisal collusion.
It is 2010 and Ambassador Wanta is still fighting to gain access to the $4.5 trillion that was wired to him. This isn’t the place for his story. If you want more information, it’s at the blog address provided above. The point is, this has been a “story” for a long time, but Wanta fights his battle for justice alone.
Lee Wanta’s tie to this particular article? In 1995, Wanta’s home was unlawfully foreclosed by Wisconsin authorities. There was no mortgage on the home. Charges had been filed against him – unlawful charges for a civil income tax assessment. That’s all it takes: Not proof of guilt, just “an assessment.”
How different things might be today if, when the funds one man transferred into the United States were unlawfully withheld from him, every citizen in the country had written to their Senator and Congressman, demanding this one person be treated lawfully. That’s how they do things, you know? They fly one false flag to see if the public will allow it. When we do, they fly a bigger false flag, next time. Finally, as the greedy always do, they fly a flag so big it kills the goose that lays the golden eggs. This time around, the goose happens to be named “America’s economy.”
The mortgage mess makes it very clear how the intelligence agencies have been compromised. If they were not compromised, this kind of fraud could not be carried out with impunity on such a broad scale. As Professor Black suggests, over a thousand arrests were made during the savings and loan scandal and this is 40 times greater. Why have no arrests been made of mortgage fraudsters? Maybe it’s their Wall Street addresses – or, connections to that address?
It reminds me of the popular email story about when the Nazis came for Jews who were strangers. Jews and others, including Christians, who didn’t know them ignored the cries for help. Then they came for Jews who were acquaintances, then those who were friends. Still cries for help were ignored. “Then the Nazis came for me… but there was no one left to cry out to for help.”
We need to pay more attention to individual government abuse. When things are small, they can be stopped. When fraud gains volume and momentum, it’s too late to stop things without causing a major crisis.
So many innocent people get hurt because we don’t confront those we elect to office. So many innocent people could be spared if we cared enough to act rather than sit back and watch and wait for the next headline.
People who think they can avoid confrontation with evil need a good dose of reality. Evil tends to seek out the non-confrontational.
Will someone be there when you cry out for help?
Marilyn M. Barnewall for NewsWithViews