FedUpUSA

Archive for the ‘Mortgage Bonds’ Category

Interesting presentation with slides and video can be viewed here…

Related educational information:

1. Robosigners and Other Servicing Failures: Protecting the Rights of RMBS Investors
2. Association of Mortgage Investors Letter To JPMorgan Trust Administration RE: Notification of and Request to Address Pervasive Issues in RMBS Trusts
3. Ocwen Scoops Up Saxon Servicing Rights
4. Invitation: County Sheriffs’ Role in Protecting Individual Liberties
5. Live Webcast Wed May 4th 9AM EDT | Presentation to Michigan House of Rep on Mortgage Fraud by Bill Bullard and Curtis Hertel, Jr.

Whoo boy.  A couple things on the MBS front today, both succinctly synopsized by The Market-Ticker:

Here we join everyone’s favorite Communist dictator in his bunker after receiving the news that the truth has come out about MERS (Mortgage Electronic Registration Systems) and that the key to his little mortgage securitization scheme has been exposed.  (Warning: NSFW, strong language.)

How the banks could inflict such damage on the country’s home title and mortgage registry system would take another investigation by Congress to determine – assuming Congress was interested.

The Mortgage Electronic Registration Systems company (known as MERS), which has been at the center of legal problems affecting the securitization of home mortgages and foreclosures, has given up one of its principal corporate objectives. It is now instructing its members to cease foreclosing on residential properties in the name of MERS, and to begin immediately to register all assignments of mortgages with local county recorders of deeds. (Image)

The whole purpose of MERS when it was established in 1996 was to by-pass the county recording process, and the billions of dollars of fees that banks and mortgage companies would have had to pay to comply with state and local real estate laws. MERS operated on a legal assumption that it could have its cake and eat it too, by acting as an agent for its member banks in their real estate transactions, but also acting if necessary as a principal in its own name when it came to assigning mortgages and foreclosing on properties.

This legal principle took a devastating blow last week when US Bankruptcy Judge Robert Grossman of New York issued a ruling stating that MERS cannot operate as a principal when it came to assignments and foreclosures. The company only maintained a parallel data base of mortgage assignments that gave it no legal rights to interfere in real estate legal processes. By making changes to its rules today that will abandon any pretense that MERS is a principal to real estate transactions, the company is bowing to Judge Grossman’s ruling. By also instructing its members to begin filing mortgage assignments with county clerks, MERS is defeating one of the basic purposes of its establishment: the avoidance of real estate fees.

Fee avoidance was essential if the home mortgage was ever going to be securitized, since securities require multiple assignments of the same mortgage which eventually finds itself in the hands of a trustee for the security. It is now open to question whether mortgage backed securities can remain profitable with fees having to be paid multiple times for as many as 1,000 mortgages in a security. This is going to have serious implications for Fannie Mae and Freddie Mac, which are the only parties left in the US which issue and securitize home mortgages. Fannie and Freddie were founding partners in the establishment of MERS, so this is as much a blow to their business model as it is to MERS, which the two government agencies can ill afford when Congress is debating their future.

Judge Grossman was fully aware of the implications of his ruling.

The Court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States. However, the Court must resolve the instant matter by applying the laws as they exist today. It is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This Court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this Court to turn a blind eye to the fact that this process does not comply with the law. Link

MERS claims that over 50 million mortgages in the US have been registered on its system. Given the action MERS took today, it will be much harder now for lawyers to argue in court that assignments made only on the MERS registry are legally valid. Unfortunately, for any of these 50 million mortgages that were securitized, chances are the various assignments along the way to the trustee were not recorded on local government records. This now means the chain of title is “clouded”, and such uncertainty affecting tens of millions of mortgages is the last thing the housing market needs. Sellers and buyers don’t know if the title will be clear of any other claims should they engage in a transaction, and homeowners might not even know if they are making monthly payments to the right bank.

Similarly, trillions of dollars of mortgage backed securities are now clouded too, because they aren’t backed by mortgages. MERS is effectively admitting that these securities are uncollateralized, which means investors now have a sound legal claim that the banks issuing the securities should buy them back at 100% of face value. There are, in fact, reasonable claims already being made by some investors against, for example, Wells Fargo and JP Morgan Chase, that these banks perpetrated a fraud by selling so-called “mortgage backed securities” which they should have known were uncollateralized.

It is questionable if MERS can even survive this capitulation to legal reality, but MERS only has 50 employees. Whether Fannie Mae and Freddie Mac can survive is now also open to question, especially if the housing market is going to revert to the old model where mortgages are kept forever by the bank originating the transaction, since securitization will be defunct. Even if Congress intervenes and passes a national law that recognizes the principal rights of some entity that replaces MERS, this will still probably require that each assignment in a securitization be registered locally and fees paid.

How the banks could inflict such damage on the country’s home title and mortgage registry system would take another investigation by Congress to determine – assuming Congress was interested. One thing is for certain: if the CEOs of all the major banks don’t resign because of this scandal, if there isn’t a thorough house cleaning of the boards and executive ranks of the major banks behind the mortgage securitization process, if in fact no one takes any responsibility for placing tens of millions of American homes in legal limbo, than we can conclude malfeasance and corruption have taken firm root on Wall Street.

First published at The Agonist

The following organizations are Shareholders of MERS.

American Land Title Association
Bank of America
CCO Mortgage Corporation
Chase Home Mortgage Corporation of the Southeast
CitiMortgage, Inc.
Commercial Mortgage Securities Association
Corinthian Mortgage Corporation
EverHome Mortgage Company
Fannie Mae
First American Title Insurance Corporation
Freddie Mac
GMAC Residential Funding Corporation
Guaranty Bank
HSBC Finance Corporation
Merrill Lynch Credit Corporation
MGIC Investor Services Corporation
Mortgage Bankers Association
Nationwide Advantage Mortgage Company
PMI Mortgage Insurance Company
Stewart Title Guaranty Company
SunTrust Morgage, Inc.
United Guaranty Corporation
Washington Mutual Bank
Wells Fargo Bank, N.A.
WMC Mortgage Corporation

Source:  MERS

Adam Levitin testifying before Congress regarding foreclosure practices:

MERS & The Foreclosure Crisis

The Big Banks & Lenders Have Committed Mortgage Fraud

Now, someone tell me exactly why MERS and its owners/members have not been prosecuted?  And please tell me why foreclosures initiated or assigned by MERS, especially in non-judicial states, are still continuing.

h/t Analyzer

Damn those deadbeat borrowers…

From the Allstate vs JP Morgan lawsuit:

Allstate selected a random sample of loans from each offering in which it invested to test Defendants’ representations on a loan-level basis. Using techniques and methodologies that only recently became available, Allstate conducted loan-level analyses on nearly 26,809 mortgage loans underlying its Certificates, across 17 of the offerings at issue here.

For each offering, Allstate attempted to analyze 800 defaulted loans and 800 randomly-sampled loans from within the collateral pool. These sample sizes are more than sufficient to provide statistically-significant data to demonstrate the degree of misrepresentation of the Mortgage Loans’ characteristics. Analyzing data for each Mortgage Loan in each Offering would have been cost-prohibitive and unnecessary. Statistical sampling is an accepted method of establishing reliable conclusions about broader data sets, and is routinely used by courts, government agencies, and private businesses. As the size of a sample increases, the reliability of its estimations of the total population’s characteristics increase as well. Experts in RMBS cases have found that a sample size of just 400 loans can provide statistically significant data, regardless of the size of the actual loan pool, because it is unlikely that such a sample would yield results markedly different from results for the entire population.

Specifically, Allstate did the following:

To determine whether a given borrower actually occupied the property as claimed, Allstate investigated tax information for the sampled loans. One would expect that a borrower residing at a property would have his or her tax bills sent to that address, and would take all applicable tax exemptions available to residents of that property. If a borrower had his or her tax records sent to another address, that is good evidence that he or she was not actually residing at the mortgaged property. If a borrower declined to make certain tax exemption elections that depend on the borrower living at the property, that also is strong evidence the borrower was living elsewhere.

A review of credit records was also conducted. One would expect that people have bills sent to their primary address. If a borrower was telling creditors to send bills to another address, even six months after buying the property, it is good evidence he or she was living elsewhere.

A review of property records was also conducted. It is less likely that a borrower lives in any one property if in fact that borrower owns multiple properties. It is even less likely the borrower resides at the mortgaged property if a concurrently-owned separate property did not have its own tax bills sent to the property included in the mortgage pool.

A review of other lien records was also conducted. If the property was subject to additional liens but those materials were sent elsewhere, that is good evidence the borrower was not living at the mortgaged property. If the other lien involved a conflicting declaration of residency, that too would be good evidence that the borrower did not live in the subject property.

In a nutshell, as Allstate summarizes, it was lies all the way:

the disclosed underwriting standards were systematically ignored in originating or otherwise acquiring non-compliant loans. For instance, recent reviews of the loan files underlying some of Allstate’s Certificates reveal a pervasive lack of proper documentation, facially absurd (yet unchecked) claims about the borrower’s purported income, and the routine disregard of purported underwriting guidelines. Based on data compiled from third-party due diligence firms, the federal Financial Crisis Inquiry Commission (“FCIC”) noted in its January 2011 report:

The Commission concludes that firms securitizing mortgages failed to perform adequate due diligence on the mortgages they purchased and at times knowingly waived compliance with underwriting standards. Potential investors were not fully informed or were misled about the poor quality of the mortgages contained in some mortgage-related securities. These problems appear to be significant.

Some of the unbelievable findings are presented below. They speak for themselves…and, again in any normal non-banana republic, would lead to at least several criminal prosecutions. In America? No way.

Not surprisingly, the performance of loans issued by JPM and its acquisition Bear, deteriorated rapidly post issuance:

Read more at ZeroHedge

Allstate vs JP Morgan 2-16-2011

ZeroHedge

4closureFraud