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Fannie and Freddie Demand $6 Billion for Sale of “Faulty Mortgage Bonds”

by Neil Garfield

You read the news on one settlement after another, it sounds like the pound of flesh is being exacted from the culprits again and again. This time the FHFA, as owner of Fannie and Freddie, is going for a settlement with Bank of America for sale of “faulty mortgage bonds.” And most people sit back and think that justice is being done. It isn’t. $6 Billion is window dressing on a liability that is at least 100 times that amount. And stock analysts take comfort that the legal problems for the banks has basically been discounted already. It hasn’t.

For practitioners who defend mortgage foreclosures, you must dig a little deeper. The term “faulty mortgage bonds” is a euphemism. Look at the complaints there filed. When they are filed by agencies it means that after investigation they have arrived at the conclusion that something was. very wrong with the sale of mortgage bonds. That is an administrative finding that concluded there was at least probable cause for finding that the mortgage bonds were defective and potentially were criminal.

So what does “defective” or “faulty” mean? Neither the media nor the press releases from the agencies or the banks tell us what was wrong with the bonds. But if you look at the complaints of the agencies, they tell you what they mean. If you look at the investor lawsuits you see that they are alleging that the notes and mortgages were “unenforceable.” Both the agencies and the investors filed complaints alleging that the mortgage bonds were a farce, sham or in other words, a PONZI Scheme.

Why is that important to foreclosure defense? Digging deeper you will find what I have been reporting on this blog. The investors money was not used to fund the REMIC trusts. The unfunded trusts never had the money to buy or fund the origination of bonds. The notes and mortgages were never sold to the Trusts even though “assignments” were executed and shown in court. The assignments themselves were either backdated or violated the 90 day cutoff that under applicable law (the laws of the State of New York) are VOID and not voidable.

What to do? File Freedom of Information Act requests for the findings, allegations and names of investigators for the agency that were involved in the agency action. Take their deposition. Get documents. Find put what mortgages were looked at and which bond series were involved. Get a list of the mortgages and the bonds that were examined. Get the findings on each mortgage and each mortgage bond. Use the the investor allegations as lender admissions admissions in court — that the notes and mortgages are unenforceable.

There is a disconnect between what is going on at the top of the sham securitization chain and what went on in sham mortgage originations and sham sales of loans. They never happened in the real world, no matter how much paper you throw at it.

And that just doesn’t apply to mortgages in default — it applies to all mortgages, which is why all the mortgages that currently exist, and most of the deeds that show ownership of the property have clouded and probably “defective” and “faulty” titles. It’s clear logic that the government and the banks are seeking to avoid, to wit: that if the way in which the money was raised to fund the loans or purchase the loans were defective, then it follows that there are defects in the chain of title and the money trail that were obviously not disclosed, as per the requirements of TILA and Reg Z.

And when you keep digging in discovery you will find out that your client has some clear remedies to collect the profits and compensation paid to undisclosed recipients arising out of the closing of the “loan.” These are offsets to the amount claimed as due. If the loan was not funded by the Trust, then the false paper trail used by the banks in foreclosure is subject to successful attack. If the loans were in fact funded directly by the trust complying with the REMIC provisions of the Internal Revenue Code, then the payee on the note and the mortgagee on the mortgage would be the trust — or if the loan was actually purchased, the Trust would have issued money to the seller (something that never happened).

And lastly, for now, let us look at the capital structure of these banks. A substantial portion of their capital derives from assets in the form of mortgage bonds. This is the most blatant lie of all of them. No underwriter buys the securities issued by the company seeking financing through an offering to investors. It is an oxymoron. The whole purpose of the underwriter was to create securities that would be appealing to investors. The securities are only issued when you have a buyer for them, and then the investor is the owner of the security — in this case mortgage bonds.

The bonds are not issued to the investment bank as an asset of the investment bank. But they ARE issued to the investment bank in “street name.” That is merely to facilitate trading and delivery of certificates which in most cases in the mortgage bond market don’t exist. The issuance in street name does not mean the banks own the mortgage bonds any more than when you a stock and the title is issued in street name mean that you have loaned or gifted the investment to the investment bank.

If you follow the logic of the investment bank then the deposits of money by depository customers could be claimed as assets — without the required entry in the liabilities section of the balance sheet because every dollar on deposit is a liability to pay those monies on demand, which is why checking accounts are referred to as demand deposits.

Hence the “asset” has been entered on the investment bank balance sheet without the corresponding liability on the other side of their balance sheet. And THAT remains that under cover of Federal Reserve purchase of these bonds from the banks, who don’t own the bonds, the value of the bonds is 100 cents on the dollar and the owner is the bank — a living lies fundamental. When the illusion collapses, the banks are coming down with it. You can only go so far lying to the public and the investment community. Eventually the reality is these banks are underfunded, under capitalized and still being propped up by quantitative easing disguised as the purchase of mortgage bonds at the rate of $85 Billion per month.

We need to be preparing for the collapse of the illusion and get the other financial institutions — 7,000 community and regional banks and credit unions — ready to take on the changes caused by the absence of the so-called major banks who are really fictitious entities without a foundation related to economic reality. The backbone is already available — electronic funds transfer is as available to the smallest bank as it is to the largest. It is an outright lie that we need the TBTF banks. They have failed and cannot recover because of the enormity of the lies they told the world. It’s over.

New Upcoming Fines for JP Morgan and Chase Co.


Mortgage group concerned about payment structures for fines 

http://www.insidecounsel.com/2013/10/08/mortgage-group-concerned-about-payment-structures?t=litigation 

Group says large banks have the option to leverage loans they don’t own in order to settle violations

BY CHRIS DIMARCO

October 8, 2013 • Reprints 

While the Department of Justice (DOJ) and J.P. Morgan and Chase Co. have still yet to reach a settlement to resolve a number of pending probes, investors are concerned that they could be unfairly required to shoulder the burden the banks pay out. 

A group of mortgage bond investors has penned a letter to the DOJ, asking it to prevent any bank from using mortgage-backed security adjustments to pay fines. They did not directly imply that the settlement they were talking about stemmed from the ongoing discussions between JP and the DOJ, but raised concerns surrounding settlements with any major bank. 

The group, the Association of Mortgage Investors (AMI), represents about 25 individuals and controls about $56 billion in assets under its organization. In the letter, which was reviewed by The Wall Street Journal, the group’s executive director Chris Katopis says, “Parties sued by the government or third-parties should not be able to settle with assets that they do not own, namely other people’s money.” 

As of last week, J.P. Morgan and the DOJ had yet to come to agreement terms that would end a series of investigations pending for the bank. Settlement figures as high as $11 billion have been kicked around, according to individuals close to the case, although no official word has been made. According to speculation, $7 billion of that total would be paid out in fines, with an additional $4 billion going towards relief for struggling homeowners. 

The Association of Mortgage Investors is said to be posturing proactively because of previous mortgage settlements made this year. In these settlements, banks could receive partial settlement credit if they reduced loan-balances. However, many of the mortgages they reduced balances on were managed by investors, and therefore not technically owned by the banks. 

There has been little news out of the J.P. Morgan talks outside of speculation, and it is not known if the Department of Justice is considering the type of payment structure the AMI is fearful of in their talks.

Radiation Poisoning!


Just Released: Doctors Report Thousands Of Japanese People With Nose Bleeds From Radiation (VIDEO)

Wednesday, October 2, 2013 11:57

http://beforeitsnews.com/alternative/2013/10/just-released-doctors-report-thousands-of-japaneese-people-with-nose-bleeds-from-radiation-video-2782118.html

(Before It’s News)

There are thousands of people in Japan reporting to be suffering massive and recurring nosebleeds in recent days — Gundersen:

Japanese doctors explain that, “We know our patients have radiation illness” but we are forced to keep it secret (VIDEO)

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Over 3,000 ppl mostly of age under 30 are suffering from recurring massive nosebleeding in Japan
Source: Takahiro Katsumi (Foreign Policy Aide to Senator Tadashi Inuzuka, a member of the House of Councillors of the Japanese National Diet –Source)
Date: Updated Oct. 1, 2013
h/t Anonymous tips

  1. FACT: Over 5,000 ppl were reported of tweeting “nosebleed”(hanaji) over the past two-day period from 9/22-9/23 http://togetter.com/li/567445
  2. FACT: Over 3,000 ppl were reported of tweeting “can’t stop my nosebleed” (hanaji ga tomaranai) during the week of 9/20-9/30 (as of 12am 10/01/2013 JST)http://togetter.com/li/568710
  3. FACT: Over 2,500 ppl were reported of tweeting “I’m nosebleeding” (hanaji ga deta) during the short days of 9/28-9/30 (as of 12 am 10/01/2013 JST)http://togetter.com/li/570016

[…] WHAT YOU CAN DO:

For Japanese Facebook and Twitter users, I’ve been asking for assistance to help spread the survey to as much of the affected people as possible using the list shown above. For users overseas, I would like to ask the following: Help me create a database out of this massive list; Help me find reliable statistics on nosebleeding in general vis-a-vis abnormal nosebleeding; and Help me devise a way to bring in the international civic community’s attention on the matter.

See the complete report here

‘Radioactive Spill’ at Fukushima: Tons seeping into ground; ‘Widespread structural problems’ indicated with tanks — Nitrogen injection for preventing explosions at reactors temporarily halted
http://enenews.com/radioactive-spill-…

Nuclear regulator criticized for ‘red tape’ job
Japan’s nuclear regulator is coming under fire from intellectuals. They’re being criticized for bureaucratic behavior.
The Nuclear Regulation Authority fielded comments on Monday from 6 experts who are studying the crisis in Fukushima. The discussion was a review of the NRA’s first year of operation.

“Fear of contaminated food and radioactivity in the metropolitan area” Takashi Hirose
http://blog.goo.ne.jp/jpnx05/e/7db9b9…

The World Must Take Charge at Fukushima
http://coto2.wordpress.com/2013/09/30…

Dr. Helen Caldicott Talks Bluntly About Fukushima
http://www.youtube.com/watch?v=Gqz9qD…

CriticalReads:More News Mainstream Media Chooses To Ignore By Josey Wales, Click Here!

Attorney Mark Stopa Shows Guts Confronting Appellate Court Bias


Bias Within the Court System, Blatantly Obvious, But They Refuse to Recuse Themselves

Livinglies's Weblog

I have just received a copy of a daring and tempestuous motion for rehearing en banc filed by the winner of the appeal. The homeowner won because of precedent, law and common sense; but the court didn’t like their own decision and certified an absurd question to the Florida Supreme Court. The question was whether the Plaintiff in a foreclosure case needs to have standing at the commencement of the action. Whether it is jurisdictional or not (I think it is clearly jurisdictional) Stopa is both right on the law and right on his challenge to the Court on the grounds of BIAS.

The concurring opinion of the court actually says that the court is ruling for the homeowner because it must — but asserts that it is leading to a result that fails to expedite cases where the outcome of the inevitable foreclosure is never in doubt. In other…

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