Finally, Texas Attorney General Greg Abbott’s office has caught on to these thieves.

Trying to resolve a problem mortgage?  Is the bank breathing down your nneck or threatening foreclosure?

Read our testimonials.  Ask for references.  Then act!!!

Crooks like AHMSI roll over when hammered by negotiators and/or attorneys who know how to deal with predatory servicers.

If your mortgage company is AHMSI call us ASAP and find out what kind kind of success we’ve had with these yahoos.

– The Bank Slayer

Texas AG Charges Servicer With Violating Debt Collection Laws

Tuesday, August 31, 2010

Texas Attorney General Greg Abbott has charged Coppell, TX-based American Home Mortgage Servicing Inc., the nation’s largest independent subprime servicer, with allegedly “using illegal debt collection tactics and improperly misleading struggling homeowners.”

According to a statement released by his office, AHMS collections agents used “aggressive and unlawful tactics to collect payments from Texas homeowners who had difficulty meeting their payment obligations.” State investigators claim the defendant also failed to credit homeowners who properly submitted their payments on time.

The enforcement action charges AHMS with multiple violations of the Texas Debt Collection Act and the Texas Deceptive Trade Practices Act. The state is also seeking civil penalties of up to $20,000 per violation of the DTP.

Philippa Brown, a spokesperson for American Home Mortgage, said the company does not comment on pending litigation.

AHMSI is owned by the New York-based private equity firm WL Ross & Co., which did not return a phone call for comment by deadline today.

It is central to the issue of appraisal fraud. Anyone who moved into a new development knows that the developer was raising prices like crazy to create a a sense of urgency on the part of borrowers. Those prices from the developers were used an excuse to inflate the appraisals ona continual basis, so that a house of exactly the same model and features would be appraised one month for $350,000 and then a month later for $375,000 or more.

The developers knew they could do this because they knew the “lender” would approve it. It was a classic dysfunctional dance in which everyone was lying to everyone else. And everyone, except the borrower and the investor-lender knew it. Thus suits against the developer, especially those with mortgage offices on premises, can be expected to rise by both private actions and public actions from regulatory agencies and law enforcement. It was fraud.

FDIC and Sheila Blair sue IndyMac

LA Times

The agency accuses the managers of the defunct bank’s Homebuilder Division of acting negligently by granting loans to developers who were unlikely to repay the debts.
By E. Scott Reckard, Los Angeles Times

July 14, 2010

Launching a new offensive against leaders of failed financial institutions, federal regulators are accusing four former executives of Pasadena’s defunct IndyMac Bank of granting loans to developers and home builders who were unlikely to repay the debts.

The lawsuit by the Federal Deposit Insurance Corp. alleges that the IndyMac executives acted negligently and seeks $300 million in damages.  It is the first suit of its kind brought by the FDIC in connection with the spate of more than 250 bank failures that began in 2008.   Regulators said it wouldn’t be the last.

“Clearly we’ll have more of these cases,” said Rick Osterman, the deputy general counsel who oversees litigation at the agency.

The FDIC has sent letters warning hundreds of top managers and directors at failed banks — and the insurers who provided them with liability coverage — of possible civil lawsuits, Osterman said. The letters go out early in investigations of failed banks, he added, to ensure that the insurers will later provide coverage even if the
policy expires.

The four defendants in the FDIC lending negligence case, who operated the Homebuilder Division at IndyMac, collectively approved 64 loans that are described in the 309-page lawsuit.

They are:

•Scott Van Dellen, the division’s president and chief executive during six years ending in its seizure;

•Richard Koon, its chief lending officer for five years ending in July 2006;

•Kenneth Shellem, its chief credit officer for five years ending in November 2006;

•William Rothman, its chief lending officer during the two years before the seizure.

Through their attorneys, they vigorously denied the allegations.

“The FDIC has unfairly selected four hard-working executives of a small division of the bank … to blame for the failure of IndyMac,” said defense attorney Kirby Behre, who represents Shellem and Koon. “We intend to show that these loans were done at all times with a great deal of care and prudence.”

Defense attorney Michael Fitzgerald, who represents Van Dellen and Rothman, said no one at the company or its regulators foresaw the severity of the housing crash before it struck, and that IndyMac was one of the first construction lenders to pull back when trouble struck the industry in 2007.

Fitzgerald added that the FDIC thought Van Dellen trustworthy enough that it kept him on to run the division after the bank was seized.  The suit naming the IndyMac executives was filed this month in federal court in Los Angeles, two years after the July 2008 failure of the Pasadena savings and loan. The bank is now operated under new ownership as OneWest Bank.

IndyMac, principally a maker of adjustable-rate mortgages, was among a series of high-profile bank failures early in the financial crisis that were blamed on defaults on high-risk home loans and the securities linked to them.  But the majority of failures since then have been at banks hammered by losses on commercial real estate, particularly loans to residential developers and builders — and IndyMac had a sideline in that business
as well through its Homebuilder Division.

The suit alleges that IndyMac’s compensation policies prompted the home-building division to increase lending to developers and builders with little regard for the quality of the loans.   “HBD’s management pushed to grow loan production despite their awareness that a significant downturn in the market was imminent and despite warnings from IndyMac’s upper management about the likelihood of a market decline,” the FDIC said in its complaint. An investigation of IndyMac’s residential mortgage lending practices could lead to another civil suit, potentially naming higher-up executives, attorneys involved in the case said.

Separately, a criminal grand jury investigation into the actions of IndyMac executives continues, according to a knowledgeable federal official who was not authorized to publicly discuss the investigation. The bank, known mostly for providing home loans without requiring proof of income from borrowers, had operated its builder-loan division since 1994.   The lawsuit said IndyMac had about $900 million in land acquisition, development and construction loans on its books when the bank  collapsed. Losses on the portfolio are expected to total $500 million — minus whatever the FDIC can recover through litigation.

The FDIC’s Osterman said the government recovered about $5.1 billion from former bank and thrift executives and their outside professional advisors after the last major financial crisis devastated the savings and loan industry in the 1980s. Most of the money came from insurers that had written policies covering bank directors and officers against negligence or other misdeeds. Because the warnings of possible lawsuits are mailed out during the early stages of investigations, it’s frequently decided later that the cases aren’t strong enough to bring or aren’t likely to be cost-effective and so are dropped, Osterman said. FDIC spokesman David Barr said the agency generally had three years from the date of a failure to file civil cases.

While a Default Judgment is unlikely to last forever, U.S. Bank never bothered to answer the lawsuit in the first place.

This isn’t the first time a large bank has been forced to negotiate themselves out of hole.

We continue to see homeowners win the initial battles versus large banks when they are willing to pursue the bank and force them to come forward to defend their position as a rightful foreclosing entity.

Tip for the day…attack early and often.

To boot, when they do answer they are likely to just make it up as they go along…Below is an except from a Florida case regarding U.S. Bank.   The Plaintiff is the bank, Defendant is homeowner.

The Assignment, as an instrument of fraud in this Court intentionally perpetrated upon this court by the Plaintifff was made to appear as though it was created and notarized on December 5, 2007. However, that purported creation//notarization date was facially impossible: the stamp on the notary was dated May 19,2012. Since Notary commissions only last four years in Florida (see F .S. Section 117.01 (l )), the notary stamp used on this instrument did not even exist until approximately five months after the purported date on the Assignment.

Posted on April 7, 2010 by Neil Garfield

Plaintiff has failed to produce answers to the Interrogatories for a period of 26 months, between the time the Interrogatories and the Request for Production were served on January 8, 2008 and the date of the hearing on the Motion to Compel took place on March 1,2010. Additionally, the court finds that the Plaintiff failed to produce responses to the Request for Production propounded in July 2009.

Defendant’s Motion in Limine/Motion to Strike was based on an allegation that the Assignment of Mortgage was created after the tiling of this action, but the document date and notarial date were purposely backdated by the Plaintiff to a date prior the filing of this foreclosure action.

The court specifically finds that the purported Assignment did not exist at the time of filing ofthis action; that the purported Assignment was subsequently created and the execution date and notarial date were fraudulently backdated, in a purposeful, intentional effort to mislead the Defendant and this Court. The Court rejects the Assignment and finds that is not entitled to introduction in evidence for any purpose. The Court finds that the Plaintiff does not have standing to bring its action. (See BAC Funding Consortium, Inc. ISOAIATIMA v. Genelle Jean-Jacques, Serge Jean-Jacques, Jr. and U.S. Bank National Association, as Trustee fo rthe C-Bass Mortgage Loan Asset Backed Certificates, Series 2006-CBS (2nd DCA Case No. 2f)~08-3553) Feb. 12,2012.)

The Assignment, as an instrument of fraud in this Court intentionally perpetrated upon this court by the Plaintiff, was made to appear as though it was created and notarized on December 5, 2007. However, that purported creation/notarization date was facially impossible: the stamp on the notary was dated May 19,2012. Since Notary commissions only last four years in Florida (see F .S. Section 117.01 (l )), the notary stamp used on this instrument did not even exist until approximately five months after the purported date on the Assignment.

Thanks to Consumerlaw.org for this article.

– The Bank Slayer

Bait and switch program

The Mortgage Bankers Association says “Lenders generally go to foreclosure as a measure of last resort, after all other options, including loan modification, are exhausted.” NYT article here.  Yeah, and Tiger Woods cheated on his wife as a last resort too.  See news story below.

These examples are from Texas, but this is a national problem.  The federal government created HAMP to enable homeowners to modify their loans and avoid foreclosures but few permanent modifications have actually occurred.  The Program’s own Loan Modification Report here, shows that as of January 2010 less than 4% of borrowers that are more than 60 days delinquent have received permanent modifications.  The first step is obtaining a trial modification, and very few homeowners have been offered one (according to the report it’s about 37.3% of eligible borrowers).

One reason for this is that loan servicers give confusing information — often what borrowers are told on the phone conflicts with the information that they receive in writing.  For example, borrowers are told on the phone that while they are in review their house will not be sold, but continue receiving letters saying the lender is foreclosing.  Loan servicers tell borrowers not to worry about the documents they get as “it is part of the process.”  Then a few days before the sale, they unilaterally decide that the borrower has not provided a necessary document or piece of information, and proceed to the sale.

Further, servicers routinely lose borrower documents, want more, and then lose these.  No person is responsible or accountable for the loan file.  Instead, the division of labor is so fractured that a borrower might talk to 5 or 6 different customer service representatives in 3 or 4 different departments just trying to get an answer to a simple question such as “what documents are missing from my application?” Or “what program am I being considered for?”  All of these representatives are merely consulting a computer screen that may take days to update, and will only contain information if the appropriate representatives actually input it.  The result is that servicers spend disproportionate resources pushing customers from one department to another, and never actually problem-shooting to resolve the minor defects in modification applications.

Servicers claim that they are overloaded and are working as fast as they can.  I believe them on this point – they are overloaded because they allocate the bulk of their resources to representatives that talk borrowers in circles reading inaccurate information off computer screens, rather than to training representatives to analyze and resolve problems.  And servicers are working as fast as they can – to foreclose on homeowners.  Why?  The answer to that question is discussed in an article by the National Consumer Law Center (NCLC) : “Why Do Servicers Foreclose When They Should Modify and Other Puzzles of Servicer Behavior” here.

The national bait-and-switch program is working perfectly.  They trick people and distract them with dreams of modification, and meanwhile foreclose on the home. Lenders merely get borrowers to chase their tails, and never even tell them that their HAMP modification application has been rejected.  Of course they do find out, after it is too late to run to bankruptcy court.  This is not an accident; this is their playbook.  See Report by NCLC and National Association of Consumer Advocates here.

As for the second step of the modification process, permanent loan modification, Bank of America was just sued for promising to make modifications to loans at a foreclosure clinic and failing to do so.  So far in our office, we have seen one permanent modification.  Bank of America and Wells Fargo were sued in Massachusetts for providing trial modifications, but failing to permanently modify the loan.  Article here.  HAMP guidelines are ridiculously weak.  They allow lenders to continue the foreclosure process even when they are considering a modification application.  See Supplemental Directive 09-09 here at Page 10.  Lenders are prohibited from conducting a sale when they are still considering a modification, but what they say typically is that the borrower is not eligible the day before.  Why not make that a clear ban?

Q1106. Must servicers suspend foreclosure or not initiate foreclosure for all borrowers who are potentially eligible for HAMP?

To ensure that a borrower currently in foreclosure or at risk of foreclosure has the opportunity to apply for a HAMP modification, servicers should not proceed with a foreclosure sale until the borrower has been evaluated for the program. Additionally, servicers are strongly encouraged not to initiate foreclosure until a borrower has been evaluated and determined to be ineligible for the program or the borrower fails to respond to a HAMP offer that has been made by the servicer.

HAMP 1106 FAQ, at page 3, as of February 25, 2010 here.

And while the guidelines require homeowners to get written decisions from the lender regarding their applications (see HAMP Supplemental Directive 09-08 of November 3, 2009 here), the Federal Reserve has conveniently decided that ECOA (Equal Credit Opportunity Act) does not require written decisions on HAMP applications where the borrower is in default.  See Federal Reserve Bank Consumer Affairs Letter CA-09-13here.  Once again the Federal Reserve puts the people above the banks.  The result of this matters — borrowers may find it much harder to take action based on a violation of a supplemental directive as compared to ECOA (and the lenders know it).  As a result, we see few lenders providing written denials of loan modifications which means borrowers are kept in the dark until it is too late.  The document lenders do provide regularly that indicates that a homeowner’s HAMP application was denied is an eviction notice after they foreclosed already.

As we predicted long ago (here), HAMP is a total failure.  HAMP was supposedly the industry suggested program that was going to work as an alternative to giving bankruptcy judges the authority to modify residential loans (like they have for loans on second homes and boats).  Not surprisingly, the lenders’ solution was a victory for them and an insult to the rest of the world.

Thanks to 4closureFraud for the heads up.

If you suspect something strange is going on with your mortgage or are facing a foreclosure situation contact our office today.

– The Bank Slayer

Folks, gather ’round ’cause you’re ’bout to hear a tale o’ turned tails.

In early February, a small cohort of colleagues discovered 12 BOGUS mortgage assignments across the state of Florida.

Within days, this group found another 20+ BOGUS mortgage assignmentsacross our once-great, once-honorable USA.

These “Black Deeds”, collectively, are proof that the notaries, witnesses, and signatories on each and every like assignment of mortgage is suspect at best; created as purely fabricated malarkey at worst. Professionals are starting to surmise that all of these mortgage assignments magically produced, presto-chango, to ram another foreclosure through “the system” are not credible evidence upon which the transfer of property, dispensation of justice, and the roof over a family’s head should rest.

Oh, Oh! Oh, where is my mind? One of that fraud excavating group unearthedmortgage assignments transferring property effective 09/09/9999. Now that’s some neat trick, wouldn’cha say?

And, then, here ya’ go: another colleague found a mortgage assignment back-dated four years in order to assign property two years hence. Being no math whiz, would someone please clarify if that is a net back-dating of two years? Perhaps it’s a cumulative formula, adding the 4 years to 2 years, makes the “off dating” 6 years? I dunno! How’s that really work? Sounds like an episode of Beat The Clock!

This is no mere document failure! Please. Call it what it is: foreclosures upon millions of families, evicted from their homes by financial entities with no more rights to take those homes than have you or I. When faced with this fact, the financial entities are creating, fabricating (aka MAKING UP) the “evidence” to prove that they have the right to take a family’s home and throw them with all their worldly possessions into the street! Where are the investors who really put up the money for these home loans? They must be singing the blues to see some interloper foreclose a million times over and keep the proceeds from the post-foreclosure sale. Welcome to America! Waive to the Statue of Liberty on your way in. Breathe in that democratic process air we’ve prided ourselves on for lo these 233 years.

There are millions upon millions of families being evicted onto the streets, many with no alternative housing options. It’s not so easy to find a job in the best of circumstances today. Ever tried to find and/or hold down a job without a fixed address? How ’bout the children, in the middle of their school year? What about the beloved pets of foreclosure, fully members of the newly homeless family? Ever tried to find emergency shelter or housing with a deeply loved animal or two? What of the elderly who do not have the remaining lifespan to recover from the terrible financial and personal blow and may face their remaining “golden years” begging for scarce, dwindling social-net resources. What of the disabled, those of us living in America who, withoutdramatic rescue, are too ill and infirm to ever hope to again live independently under cover.

I may or may not return here to add more…………I’m too distraught to continue writing of my country’s egregious willful complicity in these relentless evictions and property confiscation. My heart and soul start to rupture past the point of repair when I think of how America is treating it’s citizenry, including the weakest of us all; based on a million-fold fraudulent transactions from mortgage origination well past post-foreclosure sale.

Let’s move on in a more wickedly delicious track, shall we?

Two unrelated, remorseful individuals have come forward, whispering to us colleagues with tales of the inner workings and “business practices” of document creation “mills” which may or may not be operating under the direction of foreclosure mill law firm. Permission from the parties has been extracted to publish this post.

Apparently, that same fear, hopelessness, and rage which descend upon one who is evicted from the only home they know to face a bleak and uncertain future……….. Yes, THAT fear, hopelessness and rage! Well, that same emotional response seems to have hit hard on a few past and/or current employees of certain companies which may have been involved in dubious, questionable “business practices”.

A crisis of conscience? Fear of criminal charges? Facing foreclosure themselves? Relative evicted? Family member tenet unexpectedly “trashed out”? Seeing the futility of working out a loan mod? One of the signatories (or employers thereof) who frantically googles the same names over and over and over in a mad search for what is known, what is published?

Perhaps they are somehow, someway involved in the stories and references featured here, here, here, here, here, here, here, here, here, here, here, here,here, here, here, here, here, here, here, or here? Maybe they signed something that was reviewed by a justice-minded judge?

Could it be one or more of these signatories, while working for a “document solutions” company, have been “transferring property and assets” valued in the multi-billions and ostensibly owned by the top financial institutions in the world? Ron Mehig? Bethany Hood? Linda Green? From New House Title? Cheryl Hodge? Korrell Harp? From Law Offices of David Stern? Scott Anderson? Lori Brown? Barbara Hindman? Lori Brown? Whitney K. Cook? Melissa Flanagan? Lillana Morcan? Liquenda Allotey? Christina Trowbridge? Raquel Smith? Branden Kiel? Beth Cottrell? Twanna Thomas? From DocX? Shelly Sheffey? Winona Church? Nancy Reyes? William W. Huffman? Jill Arnold? Shameca Harrison? Kari Marx? Renee Hertzler? Mark Biscof? From LPS? Lorraine Brown?

Who knows? I’m not one to force another to reveal their personal motivations. I enjoy the privacy afforded me by the hard bones of my skull. I often keep my thoughts to myself and extend to others the same respect.

Foreclosure Hamlet
www.Foreclosurehamlet.org

If anyone else has “insider” information to share, just shoot me an email at foreclosurefraud@gmail.com

Who knows, maybe they will go easy on you if you do…

4closureFraud: Florida Foreclosure Defense : Law Offices of Carol C. Asbury

YIELD is the percentage or dollar return on investment. For example,

1. If you buy a bond for $1,000 and the interest rate is 5%, the yield is 5%.  Simple enough.
2. You are expecting to receive $50 per year in interest, (your yield) assuming the bond is repaid in full when it is due.
3. Imagine getting a deal, you buy the same bond for $900.
4. The interest rate is still 5% which means it still pays $50 per year in interest.  But instead of investing $1,000, you have invested $900 and you are still getting $50 per year in interest.  Good stuff.
5. Your yield has increased because $50 is more than 5% of $900.
6. In fact, it is a yield of 5.55% (yield base). You compute it by dividing the dollar amount of the interest paid ($50) by the dollar amount of the investment ($900). $50/$900=5.55%.
7. But you are also getting repaid the full $1,000 when the bond comes due so adding to the money you get in interest is the gain you made on the bond (assuming you hold it to maturity). That difference in our example is $100, which is the difference between $900 and $1,000.   Hang with me here.
8. If the bond is a ten year bond, for simplicity sake we will divide the extra $100 you are going to make by 10 years which means you will be getting an extra $10 per year.
9. If you divide that extra $10 by your investment of $900 you are getting an average annual gain of 1.1%. Adding the base yield of 5.5% to the extra yield on gain of 1.1%, you get a total yield of 6.6%.
10. The difference between the interest rate on the bond (5%) and the real yield to you as the investor (6.6%) is 1.6%, which could be expressed as a  yield spread.

YIELD SPREAD can be expressed in either principal dollar terms or in interest rate. In the above example the dollar value of the yield spread is $100, being the difference between the par value of the bond (the amount that you hope will be repaid in full) and the amount you actually invested.

For decades there has been an illegal trick played between originating lenders using yield spread that resulted in an additional commission or kickback paid to the mortgage broker, commonly referred to as a yield spread premium.  This occurs when the broker, with full consent of the “lender” steers the homeowner into a loan product that is more expensive than the one the homeowner would get from another more honest broker and lender.

1. So for example, if you qualify for a 5% (interest) thirty year fixed loan, but the broker convinces you that a different loan is the only one you can qualify for or that the different loan is “better” than the other one, we shall say in our example that he steers you into a loan for 7%.
2. The yield spread is 2% which may not sound like much, but it means everything to your loan broker and originating lender.
3. The kickback to the broker is often several hundred or evens several thousand dollars — which is the very thing consumers were intended to be protected against in TILA (Truth in Lending Act). – Typically moving a borrower up an entire point could mean a kickback to the loan officer of 3-4% of the loan value.
4. By not disclosing the yield spread premium he deprived you of the knowledge that you get get better terms elsewhere and he didn’t bother tell you that instead of working for you he was working for himself.
5. Sometimes this is discovered right on the HUD statement disguised amongst the myriad of numbers that you didn’t understand when you signed the closing papers. They were required by federal law to disclose this to you and they are required to send you back the money that was paid as the kickback and for a variety of reasons it is grounds to rescind the transaction, making the Deed of Trust or mortgage unenforceable or void.
6. The kickback is called a yield spread premium in the language of the industry. On this phase of the transaction we’ll call it Yield Spread Premium #1 or YSP1.

Now we get to the securitization part of the “loan.” If you will go back to the beginning of this article you will see that the investor was seeking and expecting $50 per year in interest. Buying the deal for $1,000 gives the investor the 5% YIELD he was seeking.

What Wall Street did was work backwards from the $50, and asked the following stupid and illegal question: What is the least amount of money we could fund in mortgages and still show the $50 in income? Answer: Anything we can get homeowners to sign.

1. In our simple example, if they get a homeowner to sign a note calling for 10% interest, then all Wall Street needs to come up with is $500. Because 10% of $500 is $50 and $50 is what the investor was expecting.
2. Wall Street sells the bond for $1,000 and funds $500 leaving themselves with a YIELD SPREAD PREMIUM of 5%+ or a value of $500, which is just as illegal as the kickbacks described above. We will call this YIELD SPREAD PREMIUM #2.
3. They take $50 out of this $500 YIELD SPREAD PREMIUM and put into a reserve fund so they can pay the interest whether the homeowner pays or not. That is why they don’t want homeowners and investors to get together, because they will discover that the investor was paid the first year out of the reserve and payments from homeowners and then stopped receiving payment even though there was continued revenue.
4. But Wall Street also had another problem. Since they had siphoned off $450 and probably sent most of it off-shore in an off balance sheet transaction (to a Structured Investment vehicle [SIV]).  The time would eventually come when the investor would want his $1,000 repaid in full just like they said it would.  That would leave them $450 short and possibly criminally liable for taking $1,000 to fund a $500 mortgage.
5. So you can see that if the homeowner pays every cent owed, this is bad news to the people on Wall Street.  They would be required to give the investor $1,000 when all they received from the homeowner was $500. Therefore they had to make certain that they (a) had a method of covering the difference that would give them “cover” when demand was made for the $1,000 and (b) a method of triggering that coverage.
6. They also needed to make it as difficult as possible for investors to get together to fire the agent of the partnership (SPV) formed to issue the bonds they bought, which they did in the express terms of the bond indenture. So logistically they needed to keep investors away from other investors and keep investors away from borrowers so that none of them could compare notes.
7. To cover the money they took from the investor they purchased insurance contracts (credit default swaps is one form). They wrote the terms themselves so that when a certain percentage of the pool failed they could declare it a failure and stop paying the ivnestors anything. The failure of the pool would trigger the insurance contracts.
8. Let’s take an example: Under normal circumstances if you buy a car, you can insure it once and if it is wrecked you get the money for it. Imagine if you could buy insurance on it thirty times over at discounted rates. So you smash the car up and instead of receiving $30,000 for the car you receive $900,000. That is what Wall Street did with your mortgage. This was not risk taking much less excessive risk taking. It was fraud.
9. So IF THE LOAN FAILED or was declared a failure as being part of a pool that went into failure, the insurance paid off.
10. Hence the only way they could cover themselves for taking $1,000 on a $500 loan was by making absolutely certain the loan would fail.
11. It wasn’t enough to use predatory loan tactics to trick people into loans that resulted in resets that were higher than their annual income. Wall Street still had the problem of people somehow making the payments anyway or getting bailed out by parents or even the government.
12. They had to make sure the homeowner didn’t want the loan anymore and the only way to do that was to make certain that the homeowner would end up in a position wherein far more was owed on the loan than the house ever was worth and far more than it would ever be worth in the foreseeable future.
13. They had to make sure that the federal government didn’t step in and help the homeowners, so they created a scheme wherein the federal government used all its resources to bail out Wall Street which had created the myth of losses on loan defaults for notes and mortgages they never owned. It would then become politically and economically impossible for the government to bail out the homeowners.
14. This is why principal reduction has been off the table. If these loans become performing again, insurance might not be triggered and the investors might demand the full $1,000. With insurance on the $500 loan they stand to collect $15,000. without it, they stand to lose $1000. There is no middle ground.
15. So they needed a method to get the “market” to rise in values as much as possible to levels they were sure would be unsustainable. That was easy. They blacklisted the appraisers who wanted to practice honestly and paid appraisers, mortgage brokers and “originating lenders” (often owned by Wall Street firms) 3-10 times their normal fees to get these loans closed. They created “lenders” that were not banks or funding the loans that had no assets and then bankrupted them.
16. With the demand for the AAA rated and insured MBS at an all-time high the demand went out to mortgage brokers not to bring them a certain number of mortgages but to bring in a certain dollar amount of obligations because Wall Street had already sold the bonds “forward” (meaning they didn’t have the underlying loans yet).
17. With demand for loans exceeding the supply of houses, they successfully created the “market”conditions to inflate the market values on a broad scale thus giving them plausible deniability as to the appraisal fraud on any one particular house.

Whether you call it appraisal fraud or simply an undisclosed yield spread premium, the result is the same. That money is due back to the homeowner and there is a liability to the investors that they don’t know about. Why are the fund managers so timid about pressing the claims? Perhaps because they were not fooled.

Thanks again to Neil Garfield for this info.

- The Bank Slayer