Sunday, October 3, 2010

Foreclosure Fraud is Contained !

The mortgage mess that has become the USA simply keeps on. Almost 3 years into it and with no end in sight and yet the same taking head shills appear daily on the propaganda network to telling you everything is A-okay, the economy is recovering and a double dip is nonsense, and balance sheets are flush with cash. 

Yup, sure it is. Just like they told you subprime was contained, housing had never declined, the economy was resilient and the selloff in the market was a temporary blip before we make new highs. So for a real look at what is going on, in particular with the mortgage market which so many of these shills point to as on the mend and recovering we turn to Yves over at the excellent blog Naked Capitalism which brought my attention to a a web site by the name of 4closurefraud. That site has a post entitled, you might wanna sit down for this, Psst. Hey you. Yea. You. I Got Just What You Need. Lender Processing Services DOCX Document Fabrication Price Sheet.

Yes you read that correctly a document fabrication price list.

In what is one of the clearer and more easy to digest explanations of what is transpiring, Here is what Yves at Naked Capitalism has to say on the subject:

 
A bombshell has dropped in mortgage land.

We’ve said for some time that document fabrication is widespread in foreclosures. The reason is that the note, which is the borrower IOU, is the critical instrument to establishing the right to foreclose in 45 states (in those states, the mortgage, which is the lien on the property, is a mere “accessory” to the note).

The pooling and servicing agreement, which governs the creation of mortgage backed securities, called for the note to be endorsed (wet ink signatures) through the full chain of title. That means that the originator had to sign the note over to an intermediary party (there were usually at least two), who’d then have to endorse it over to the next intermediary party, and the final intermediary would have to endorse it over to the trustee on behalf of a specified trust (the entity that holds all the notes). This had to be done by closing; there were limited exceptions up to 90 days out; after that, no tickie, no laundry.

Evidence is mounting that for cost reasons, starting in the 2004-2005 time frame, originators like Countrywide simply quit conveying the note. We are told this practice was widespread, probably endemic. The notes are apparently are still in originator warehouses. That means the trust does not have them (the legalese is it is not the real party of interest), therefore it is not in a position to foreclose on behalf of the RMBS investors. So various ruses have been used to finesse this rather large problem.

The foreclosing party often obtains the note from the originator at the time of foreclosure, but that isn’t kosher under the rules governing the mortgage backed security. First, it’s too late to assign the mortgage to the trust. Second. IRS rules forbid a REMIC (real estate mortgage investment trust) from accepting a non-performing asset, meaning a dud loan. And it’s also problematic to assign a note from the originator if it’s bankrupt (the bankruptcy trustee must approve, and from what we can discern, the note are being conveyed without approval, plus there is no employee of the bankrupt entity authorized to endorse the note properly, another wee problem)."


You can go to Naked Capitalism's site here and see the document price list for yourself. Needless to say here is Yves of Naked Capitalism had to say about the whole mess.

"So wake up and smell the coffee. The story that banks have been trying to sell has been that document problems like improper affidavits are mere technicalities. We’ve said from the get go that they were the tip of the iceberg of widespread document forgeries and fraud. This price sheet provides concrete proof that the practices we pointed to not only existed, but are a routine way of doing business in servicer and trustee land. LPS is the major platform used by all the large servicers; it oversees the work of foreclosure mills in every state.

And this means document forgeries and fraud are not just a servicer problem or a borrower problem but a mortgage industry and ultimately a policy problem. These dishonest practices are so widespread that they raise serious questions about the residential mortgage backed securities market, the major trustees (such as JP Morgan, US Bank, Bank of New York) who repeatedly provided affirmations as required by the pooling and servicing agreement that all the tasks necessary for the trust to own the securitization assets had been completed, and the inattention of the various government bodies (in particular Fannie and Freddie) that are major clients of LPS.


Amar Bhide, in a 1994 Harvard Business Review article, said the US capital markets were the deepest and most liquid in major part because they were recognized around the world as being the fairest and best policed. As remarkable as it may seem now, his statement was seem as an obvious truth back then. In a mere decade, we managed to allow a “free markets” ideology on steroids to gut investor and borrower protection. The result is a train wreck in US residential mortgage securities, the biggest asset class in the world. The problems are too widespread for the authorities to pretend they don’t exist, and there is no obvious way to put this Humpty Dumpty back together."

Yet through this whole mess not one individual has been arrested, let alone imprisoned. Don't worry CNBC will trot out the shills soon enough to tell you this mess is contained and is nothing to worry about. What a relief!

Good speculating to you all and please remember to never forget that "an investor is a speculator who made a mistake and will not admit it".

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