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Mortgage paperwork mess: the next housing shock?
(CBS News) If there was a question about whether we’re
headed for a second housing shock, that was settled last week with news that
home prices have fallen a sixth consecutive month. Values are nearly back to
levels of the Great Recession. One thing weighing on the economy is the huge
number of foreclosed houses.
Many are stuck on the market for a reason you wouldn’t
expect: banks can’t find the ownership documents.
Register O’Brien’s response to MA Real Estate Bar
Association
Do you want to see over 30,000 fraudulent documents that
banks are using to steal our houses? Be our guest!
UPDATE- FEB 10, 2012 – Here is what Register John OBrien had
to say
What a sad day in America. I thought for once they would do
the right thing and hold these banks accountable . I have been around along
time and I can assure you that this is a deal for the banks and by the banks.
It will not benefit the homeowner or the taxpayer. What do I tell the 32000
people in my registry who have fraudulent documents call the AG?? They are
sending the message that the big guys can do whatever they want and and get
away with it. Let us not forget that people who have lost there home with
fraudulent documents will be given two thousand dollars and a wish of good
luck. How criminal and sad. Principal reductions of 25000 will not solve the
housing crisis. Remember that it was these banks who came up with no doc
loans,sub prime mortgages and set people up for failure from day one. The
taxpayers lost 250 million in recording fees that these banks did not pay. We
need a grand jury to investigate the criminal fraud just like Boone County did.
Sadly a year from now we will be still faced with the same issues. These banks
will continue to do what they want. I am sure that later today they will be
sitting in the boardroom patting each other on the back for a job well done. I
suspect they will be giving out bonuses to each other in a week or so.I will
continue to do my job and not record fraud. I will continue to expose this
scheme to anyone who will listen. If they think I am going away they are sadly
mistaken. The fight will continue because it is the right thing to do
It’s bizarre but, it turns out, Wall Street cut corners when
it created those mortgage-backed investments that triggered the financial
collapse. Now that banks want to evict people, they’re unwinding these exotic
investments to find, that often, the legal documents behind the mortgages
aren’t there. Caught in a jam of their own making, some companies appear to be
resorting to forgery and phony paperwork to throw people – down on their luck –
out of their homes.
FRAUDULENT MORTGAGE
ASSIGNMENTS BY ROBO SIGNERS
MORTGAGE-BACKED TRUSTS, CLOSED BEFORE 2008,USING MORTGAGE
ASSIGNMENTS SIGNED IN 2011
Aames Mortgage Investment Trusts
ABFC Trusts
Ace Securities Corp. Home Equity Loan Trusts
American Home Mortgage Assets Trusts
American Home Mortgage Investment Trusts
Ameriquest Mortgage Securities, Inc. Trusts
Argent Securities, Inc. Trusts
Banc of America Alternative Loan Trusts
Banc of America Funding Trusts
Bear Stearns Alt-A Trusts
Bear Stearns ARM Trusts
Bear Stearns Asset-Backed Securities Trusts
BNC Mortgage Loan Trusts
Carrington Home Equity Loan Trusts
Carrington Mortgage Loan Trusts
Citigroup Mortgage Loan Trusts
CSFB Trusts
CSMC Trusts
CWABS Trusts
CWALT Trusts
CWMBS Trusts
Deutsche Bank Alt-A Securities Inc.
Mortgage Loan Trusts
First Franklin Mortgage Loan Trusts
First NLC Trusts
Fremont Home Loan Trusts
GSAA Home Equity Trusts
GSAMP Trusts
GSR Mortgage Loan Trusts
Harborview Mortgage Loan Trusts
HSI Asset Securitization Corp. Trusts
IndyMac IMSC Mortgage Loan Trusts
IndyMac INDX Mortgage Loan Trusts
Long Beach Mortgage Loan Trusts
MASTR Alternative Loan Trusts
MASTR Asset-Backed Securities Trusts
Morgan Stanley Capital I, Inc. Trusts
NatIxis Real Estate Capital Trusts
New Century Home Equity Loan Trusts
New Century Mortgage Loan Trusts
Nomura Home Equity Loan Trusts
NovaStar Home Equity Loan Trusts
NovaStar Mortgage Funding Trusts
Option One Mortgage Loan Trusts
RALI Trusts
RAMP Trusts
Residential Asset Securitization Trusts
Saxon Asset Securities Trusts
Securitized Asset-Backed Receivables Trusts
Soundview Home Loan Trusts
Structured Asset Investment Loan Trusts
Structured Asset Mort. Investments II Trusts
Structured Asset Mort. Investments II, Inc. Bear Stearns
Alt-A Trusts
WaMu Trusts
Wells Fargo Asset Securities Corp. Trusts
SPECIAL THANKS TO Lynn E. Szymoniak, Esq., FOR THIS LIST.
And what about these stories about the Federal Reserve
Selling Loans — including subprime loans that they can’t get much traction on.
But what troubles me is that the Federal Reserve is never mentioned as the
foreclosing party.
So do they own the loans or not? Based upon published
reports, the inescapable conclusion (or at least question of fact in
litigation) is whether some or all of the foreclosures are being prosecuting on
behalf of entities (trusts) that no longer exist and which are not owed
anything because they have been bought out by the Federal Reserve, which in
turns probably has no rights to pursue homeowners, and therefore should not be
claiming ownership over loans that it has no authority, legal or otherwise, to
enforce.
If the Fed is selling they must think they own them. But the
Fed is never mentioned in foreclosures and nobody seems to be arguing in court
that the Federal Reserve owns these loans, probably because the Federal Reserve
doesn’t make it easy to find out which loans they are claiming to own, and thus
which loans they could sell.
If what they are really selling are the complex derivatives
that are often used interchangeable with owning the loans, then they are stuck
with the problem of whether those loans actually made it into the REMIC pools,
a fact very much in contention in litigation started by both sides of the
transaction — borrowers and the original investors.
If the Fed is saying that they own all of the loans in the pool,
that means they bought out the entire REMIC — a consequence of insurance
contracts and credit default swaps bailed out by the Fed.
How many of those pools, bought out by the Fed still exist?
Many of the REMICS have filed papers with the SEC stating that they have no
further reporting requirements which would imply that they have no assets,
income or liabilities.
Does the Federal Reserve even know what it owns or is it
just taking the word of the insurance companies, investment banks and
intermediaries as to what was in those packages that were delivered to the Fed
for 100 cents on the dollar?
And who is foreclosing in the name of those pools when the
pool investors have been paid off?
And here is the kicker — if the pool investors were paid off
(directly or indirectly) they were paid on contracts that expressly waived the
right to subrogation; i.e., they waived the right to pursue homeowners on their
mortgage debt.
If the loans were not transferred into the pools, then these
transactions are a sham.
But they are a sham even if there was a transfer into the
pools if the Fed acquired the loans via insurance and CDS contracts that waived
subrogation. Remember the Fed bailed out AIG and other insurers so they could
make good on insurance policies covering mortgage backed securities.
They bailed out the investment Banks, not the investors. So
if the Federal reserve gave out 100 cents on the dollar for the actual mortgage
bonds that would mean that the investment banks were still holding the mortgage
bonds for sale when the market collapsed. But that isn’t what happened. The
bonds were sold forward, which means that the investors bought the bonds before
there were any loans to put in the pool. So if the Federal reserve gave
investment banks money, what were they buying?
It seems more likely that the Federal Reserve was giving the
investment banks money to make good on their counterparty liability in credit
default swaps, which also have a provision that prevents the counterparty from
exercising any right of subrogation or claims against homeowners.
But if the Federal Reserve was funding insurance contracts
and CDS then they didn’t have any ownership interest in the loans, so what are
they selling?
All these things and more raise the questions of fact that
should allow homeowners to probe through discovery into the ornate
securitization process that looks more and more like a sham itself. but the
questions in foreclosure or quiet title look the same — whom did you pay, what
did you pay, why did you pay, and when did you pay.
Follow the money and it will literally take you home. Start
with the COMBO Title and Securitization, then the Loan Level Accounting
Analysis and then launch into discovery. What you find in discovery may well
cast doubt on the origination of the loan transaction, the viability of the
note and the viability of the mortgage.
Mortgage Fraud n the past ten years, hundreds of thousands
of residential mortgages were bundled together (often in groups of about 5,000
mortgages and other negotiable instruments with an average worth of 1 billion
dollars), and investors were offered the opportunity to buy shares of each
bundle/certificates. This process is called securitization. Securitization is a
structured finance process that distributes risk by aggregating debt
instruments in a pool, then issues new securities backed by the pool. The term
“Securitization” is derived from the fact that the forms of financial
instruments used to obtain funds from the investors are securities. As a
portfolio risk backed by amortizing cash flows – and unlike general corporate
debt – the credit quality of securitized debt is non-stationary due to changes
in volatility that are time-structured dependent. If the transaction is
properly structured and the pool performs as expected, the credit risk of all
tranches of structured debt improves; if improperly structured, the affected
tranches will experience dramatic credit deterioration and loss. All assets can
be securitized so long as they are associated with cash flow. Hence, the securities
which are the outcome of securitization processes are termed asset-backed
securities (ABS). From this perspective, securitization could also be defined
as a financial process leading to an issue of an ABS. This is a highly complex
process which was developed by Wall Street. Basically, Wall Street figured a
way to turn a 30 year mortgage, with small monthly payments, into instant,
large sums of cash, which could and was, which was sold before the borrower
even signed the Note, then sold or pledged and/or utilized multiple times over.
Freddie Mac
Marshall C. Watson Law Firm
Action Date: March 12, 2011
Location: Ft. Lauderdale, FL
The Federal Home Loan Mortgage Corporation (“Freddie Mac”)
announced on March 11, 2011, that it is taking its foreclosure cases away from
the Marshall C. Watson Law Firm. The Watson firm, based in Ft. Lauderdale,
Florida, was one of the firms most often used by Freddie Mac, Fannie Mae and
mortgage-backed trusts to foreclose in Florida. The Watson Firm came under the
scrutiny of the Economic Crimes Division of the Florida Attorney General for
improper loan documentation and foreclosure practices.I
In over ten thousand Florida foreclosure cases, the Watson
firm used mortgage assignments signed by the firm’s own employees to prove that
their clients owned the mortgages. In most of these cases, Freddie Mac, Fannie
Mae and mortgage-backed trusts were claiming to own the mortgages. Fannie,
Freddie and the trusts lost or never obtained the mortgage assignments needed
to prove ownership.
In these cases, two associate lawyers in the Watson firm,
Patricia Arango and Caryn Graham, signed the Assignments to the trusts so that
the foreclosures could proceed. When Arango and Graham signed these mortgage
assignments, they did not disclose that they were lawyers in the Watson Firm.
Instead, Arango and Graham signed as officers of Mortgage Electronic
Registration Systems, Inc.
In the last three years, Arango and Graham signed as
officers of the Mortgage Electronic Registration Systems, Inc., as Nominee for
the following lenders on over 10,000 documents used in Florida foreclosures:
• Aegis Wholesale Corporation;
• America Imperial Mortgage Business, Inc.;
• American Bancorp Mortgage Corp.;
• American Home Mortgage;
• America’s Wholesale Lender;
• BNC Mortgage, Inc.;
• Century 21 Mortgage;
• Countrywide Bank, FSB;
• Countrywide Home Loans, Inc.;
• CTX Mortgage Company, LLC;
• Gateway Funding Diversified Mortgage Services;
• Decision One Mortgage Company, LLC;
• E-Loan, Inc.;
• First Choice Funding Group;
• First Magnus Financial Corporation;
• Flagstar Bank, FSB;
• Greenpoint Mortgage Funding;
• Guaranteed Mortgage Bankers;
• HomeAmerica Mortgage Corp.;
• Interstate Home Loan Center, Inc.;
• Ivanhoe Financial, Inc.;
• KB Home Mortgage Company;
• MFC Mortgage Inc. of FL;
• Quicken Loans, Inc.;
• Suntrust Mortgage, Inc.; and
• Universal American Mortgage Company, LLC.
On the majority of these documents, the date of the alleged
transaction is falsely stated. The documents were so poorly prepared that in
many cases, the new owner is shown to have acquired the mortgage months and
even years AFTER the foreclosure cases were filed by those new mortgage owners.
The Watson Firm was also the law firm that most frequently
used mortgage assignments prepared by Docx, LLC. The assignments from Docx, LLC
include thousands of documents with forged signatures of Linda Green, Tywanna
Thomas and Korell Harp, as well as dozens of documents where the lenders were
identified as “Bogus Assignee” and “A Bad Bene.” These Docx-prepared
assignments also falsely stated the dates of the alleged transfers, and even
the authority of the signers to sign on behalf of Mortgage Electronic
Registration Systems, Inc.
Despite the well-documented problems with foreclosure cases
brought by the Watson Firm, Fannie Mae has not removed the firm from its list
of approved law firms. Fannie Mae removed Florida firm Ben-Ezra & Katz in
February, 2011, and required the firm to transfer over 15,000 files. Fannie
also removed The Law Offices of David J. Stern in Plantation, Florida. That
firm announced that it would stop doing all foreclosure work as of March 31,
2011.
No criminal charges have been filed in any case involving
forged or fraudulent loan documents used by banks and mortgage lenders to
foreclose.
While courts have been critical of such documents and have
added requirements to civil procedure rules so that law firms can be sanctioned
for using such documents, no sanction has ever included any criminal charges.
Each such bundle of residential mortgages was given a name,
such as
“ABC Home Loan Trust 2006 OPT-2.” The name indicates
information
about the particular trust such as the year it was created
(2006) and its contents
(with OPT indicating that the loans in that particular trust
were originally made
by Option One Mortgage). This precludes the fact that Option
One Mortgage was defunct and barred from doing business in the State of
California during this time.
Each such bundle/trust has a Cut -Off Date identified in the
trust documents
(specifically, in the Pooling and Servicing Agreement). The
Cut Off Date is the
date on which all mortgage loans in the trust must be
identified. In short, a final
list of all of the mortgages in the bundle is set out. Each
trust also has a Closing
Date which is the date that the individual mortgages are
transferred to the Trust
Custodian, who must certify that for each mortgage, the
custodian has a
Mortgage note endorsed in blank and proof that the ownership
of the note has
been transferred. This proof is most often an Assignment of
Mortgage. Most
trusts included the following or equivalent language
regarding the Assignments:
“Assignments of the Mortgage Loans to the Trustee (or its
nominee) will not be
recorded in any jurisdiction, but will be delivered to the
Trustee in recordable
form, so that they can be recorded in the event recordation
is necessary in
connection with the servicing of a Mortgage Loan.”
Title insurance companies issued policies guaranteeing that
the trust had clear
title to the mortgages. The problems are just beginning for
the Title Companies, based on the fraud on the court which was committed by and
through robo-signing court documents. Clear Title May Not Derive From A Fraud
(including a bona fide purchaser for value).
In the case of a fraudulent transaction the law is well
settled. Numerous authorities have established the rule that an instrument
wholly void, such as an undelivered deed, a forged instrument, or a deed in
blank, cannot be made the foundation of a good title, even under the equitable
doctrine of bona fide purchase. Consequently, the fact that purchaser acted in
good faith in dealing with persons who apparently held legal title, is not in
itself sufficient basis for relief.
When widespread defaults occurred, Trustees discovered that
the laws regarding
Mortgage Assignments varied significantly from state to
state. Many issues
regarding such Assignments were simply unresolved. One of
the most significant
issues was whether Mortgage Assignments could be back-dated
or have
retroactive effective dates. This issue arose because
Trustees and their lawyers
discovered in the foreclosure process that the Assignments
could not actually be
located, or that certain states did not allow blank
Assignments.
To solve the problem of the missing Assignments, new
Assignments were made
and recorded. This was the beginning of the now infamous
“Robo-Signing” fiasco. (for a complete list on this issue, see
takeyourhomeback.com/?p=428 ) Because the question of retroactive
Assignments had not been resolved, most of these Assignments did not set forth
the actual date that the Assignment took place. The Assignments were signed and
notarized as if the transfer took place many years after the actual transfer
date.
The Assignments were prepared by specially selected law
firms and companies
that specialized in providing “mortgage default services” to
banks and mortgage
companies. In jurisdictions with a high rate of mortgage
defaults, over 80% of
the filed Mortgage Assignments in the last three years were
prepared and filed
by the same five or six law firms and default processing
companies.
In many states, two such Assignments were prepared and
filed. The first was
prepared in the name of Mortgage Electronic Registration
Systems as “nominee”
for the particular bank or mortgage company. MERS “controls”
approx. 62 million mortgages with a value of over a TRILLION DOLLARS. When MERS
authority to file foreclosures and Assignments was challenged in most
jurisdictions, with varying results, a non-MERS Assignment was prepared as
well.
In all of these cases, the Assignment was prepared to
conceal the actual date
that the property was acquired by the Trust. An examination
of the Assignments
filed showing the grantee as the Trust – such as “ABC Home
Loan Trust
2006 – OPT 2” – shows that most of these Assignments were
prepared and filed
in 2008 and 2009, when, in reality, the mortgages and notes
were actually
assigned prior to the
closing date of the Trust. While the exact closing date can only be determined
by looking at the trust documents, any Trust that includes the year in 2006 in
its title most likely closed in 2006.
If a Mortgage Assignment is dated, notarized and filed in a
year after
the year set forth in the name of the grantee trust on the
Assignment,
it is actually an Assignment specially, and in many cases,
fraudulently,
made to facilitate foreclosures.
These Specially-Made Assignments have created havoc in the
courts. In many
cases, the Specially-made Assignments are dated AFTER the
foreclosure action
has been initiated, making it appear that the Trust somehow
magically knew
prior to the assignment that it would acquire the defaulting
property several
months after the foreclosure action was initiated.
Repeatedly, courts have asked Trustees to explain why they
were acquiring non-performing loans and whether such acquisition was a
violation of the trustee’s
fiduciary duty to the Trust. No Trustee has ever come forth
and explained that
the Trust actually acquired the loan years before the
Assignment. As a result,
there are many decisions with observations similar to this
observation made by
Judge Arthur M. Schack of Kings County, New York, (see link
in www.foreclosureself-defense.com/the-library/linksresources/ )in HSBC
Bank v. Valentin, 21 Misc. 3d 1124 [A]:
Further, according to plaintiff’s application, the default
of Defendants Valentin and Ruiz began with the nonpayment of principal and
interest due on January 1, 2007. Yet, four months later, plaintiff HSBC was
willing to take an assignment of the instant nonperforming loan. The Court
wonders why HSBC would purchase a nonperforming loan, four months in arrears?
.
Further, the Court requires an explanation from an officer
of plaintiff DEUTSCHE BANK as to why, in the middle of our national sub-prime
mortgage financial crisis, DEUTSCHE BANK would purchase a non-performing loan
from INDYMAC… Federal Judge Boyko of Ohio questioned Deutsche Bank extensively
with the final outcome being the dismissal of 14 foreclosure cases
In Massachusetts in October, 2009, Land Court Judge Keith
Long reaffirmed a
March, 2009, ruling that a lender cannot begin foreclosure
proceedings before
the lender has filed and recorded the Assignment, stating:
The blank mortgage assignments they possessed transferred
nothing…in Massachusetts, a mortgage is a conveyance of land.
Nothing is conveyed unless and until it is validly conveyed.
The
various agreements between the securitization entities
stating that
each had a right to an assignment of the mortgage are not
themselves an assignment and they are certainly not in recordable form. U.S.
Bank National Association v. Ibanez, Massachusetts Land Court Misc.
consolidated with two other cases.
Many authors expect the Massachusetts Supreme Court to
reverse the Ibanez
decision, but the uncertainty itself, as in the case of the
MERS challenges,
caused lenders to flood recording offices with new
Assignments.
In cases where the Trust failed to get a valid Assignment,
the problem is
complicated by the bankruptcy of the major loan originators,
including American
Home Mortgage, Option One Mortgage, and Countrywide Home
Loans.
When these big mortgage companies filed for bankruptcy, they
did not disclose
the mortgages already sold to the trusts as assets, because
the transfers
occurred months and years prior to the bankruptcy filing.
Years later, when the
Assignments were required for foreclosures, a bankruptcy
court’s permission was
needed to Assign billions of dollars in mortgages. Most
likely in fear that a
Bankruptcy Judge would not rubber stamp such a request, no
such permission
has ever been sought. In Ohio, Judge Boyko did the complete
opposite and dismissed 14 foreclosures WITH PREJUDICE.
Part of Judge Boyko’s Decision:
“There is no doubt every decision made by a financial
institution in the foreclosure process is driven by money,” Boyko wrote in a
footnote. “And the legal work which flows from winning the financial
institution’s favor is highly lucrative.”
“The lenders rush to foreclose on delinquent buyers. But
when taking back the properties, they delay recording the deeds, leaving cities
to board up empty houses and mow lawns”
The pools, some containing bad loans like the 14 from
Deutsche Bank, are bought and sold electronically by Wall Street investment
firms, leaving behind little or no paperwork showing who holds the notes.
Boyko ruled that without written proof, Deutsche Bank has no
right to foreclose. As part of the ruling, he complained that lenders displayed
a condescending attitude that this is the way they always do business and that
the court just doesn’t understand the world of high finance. (No it’s called FRAUD, writer’s opinion, not
part of decision)
“Finally put to the test, their weak legal arguments compel
the court to stop them at the gate,” he wrote.
Boyko’s colleague, Judge Kathleen O’Malley of the U.S.
District Court of Northern Ohio, threw out 32 foreclosure cases the same week
for the same reason.
The “robo-signing of affidavits and Assignments of Mortgage
and all other mortgage foreclosure documents served to cover up the fact that
loan servicers cannot demonstrate the facts required to conduct a lawful
foreclosure. If it turns out that robo-signers did indeed sign off on loans
without review, they committed fraud by claiming knowledge of a financial
matter of which they had no personal knowledge. It could also mean that some
people are wrongly being evicted from their houses.
From underwriting fraudulent mortgages; to shuffling it
through the mortgage securitization chain without following proper legal
procedures like the simple act of passing along paperwork; to concealing or
doctoring basic facts when securitizing the mortgages and selling them to
investors, large lenders and their partners on Wall Street could face hundreds
of billions of dollars in losses by being forced to buy back faulty mortgages,
some of which have already defaulted, from misled investors.
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