Tuesday, October 12, 2010

Citigroup coins crisis "Foreclosures gone wild!"

Zero Hedge founder, Tyler Durden, and his crew have been (as usual) on point with the unfolding foreclosure/mortgage/title fraud fiasco, and yesterday they brought us another report:

"Citigroup Call on Implications on Foreclosure: "Just the Tip of the Iceburg."

You know things are getting interesting when Citigroup hosts a conference call during which their expert guest speaker, associate law professor at Georgetown University Adam Levitin, calls the current visible ramifications of the foreclosure/mortgage/title fraud crisis "just the tip of the iceberg" and suggests major unseen problems to come, and then Citi, one the largest and "most respected" (ha!) banks in the world, issues its an official report on the crisis and the conference call which the bank decides to title along the lines of "Girls Gone Wild" with a Citi spin: "Foreclosures Gone Wild."

I kid you not.

Here's the document, "Foreclosures Gone Wild," available for our scribd'ing thanks to the Village Whisperer. The following are what I think are the most telling parts of the Citi document...with a little bit of my take added for good measure:

1.) Curse those "arcane" laws-- they're always getting in the way of our fraud!

Page 1: The underlying issues which have recentlyerupted involve the proper transfer of paperwork in the mortgage securitization process. Real estate law is “arcane” and requires that paperwork be physically transferred when mortgage ownership is transferred (“assigned”) from one party to another party. It appears that in many instances during the mortgage securitization process over the past few years, the paperwork was not properly transferred. If the paperwork was not transferred in the legally required manner, it raises questions not only about who owns the mortgages in question but also about the validity and tax exempt status of the trusts in which the mortgages reside. All of these issues also bear directly on the role played by the title insurance industry.

My comment: the reason why so many "instances" over the "past few years" when "paperwork was not properly transferred" were able to manifest is because of the bank-funded MERS front operation, which "appears" to have been basically attempting not only to circumvent those "arcane" laws, but actually to supersede them. MERS was hailed as a "replacement" to these damn pesky laws--and if it wasn't for those meddling judges, it'd have gotten away with it!

2.) Don't worry--everything is under control: we'll just pay people to commit perjury!

Page 1: Banks have attemptedto remedy the aforementioned problems by having employees sign affidavits that they have personal knowledge that the trust was once in possession of the necessary documents. Two problems have emerged with regards to these affidavits. First, several news stories have reported that the people signing these affidavits had no knowledge of the matters in question despite the fact that there were legally swearing that they did. Second, the affidavits may be irrelevant because the issue is not that the documents were lost but they were never properly transferred at each step of the aforementioned securitization process.

My comment: "Having employees sign affidavits" is a very interesting way to phrase the robo-signing debacle. From whom the orders came, we do not yet know. But we do have an admission from the operations supervisor at JPM's Chase Home Finance, Beth Ann Cottrell, who gave sworn deposition on May 19, that she and seven other JPM employees signed approximately 18,000 documents per month, and that they did this for several years. These so-called robo-signers often used wildly different signatures from one document to the next, and an unconfirmed report is floating around that another confirmed robo-signer Marshe Craine's signature is even on some of President Obama's mortgage paperwork. People are searching the internet for the names of these individuals, and inspecting their own mortgage/foreclosure documents. Indeed it is "just the tip of the iceberg."

3.) C’mon, America--who do you trust: us, the criminal consortium of banks hell-bent on extracting every last drop of wealth we can out of you, your house, your investments, and most especially, your government, or those damn pesky “arcane” laws of yours?! We repeat, in case you didn't hear us the first time, your laws are just stupid and "arcane," and are unnecessarily complicating the massive international fraud-based housing system we are attempting to implement, dammit!

Page 2:
The underlying problems center around the proper transfer of paperwork. It is important to appreciate that real estate law is arcane and requires the physical transfer of documents when ownership changes hands. In industry parlance this transfer is known as “assignment.”
When a mortgage is securitized and placed in a mortgage pool, there are typically four parties involved. The mortgage bank or lender originates a mortgage and then sells it to a “sponsor” who in turn sells it to a “depositor” who then sells it to the “trust” which governs the pool. Importantly, as noted above, the original paperwork must be transferred at each step of the process.

It now appears that in many cases (1) the paperwork was not properly transferred and (2) it is unclear in many cases where the actual paperwork actually rests today.

My comments: Citigroup, repeating opinions, such as calling laws "arcane", do not magically make them

4.) And how dare you people demand that we pay taxes! Taxes?! How are we
gonna completely enslave you to our evil fiat system if we have to pay taxes?!

Page 3: Most mortgage trusts were set up as REMICs (Real Estate Mortgage Investment Conduits) which are special purpose vehicles used to pool mortgages. Under the IRS code, REMIC confers a special tax status in which the cash flows to the trust are not taxed. Investors in the trust pay taxes. The tax exempt nature is important. If the trusts were in fact to be taxed, the taxes would distort the yields required by investors.
To qualify as a REMIC under the IRS code and enjoy the beneficial tax treatment, the trust (1) must be passive and (2) cannot acquire any new assets 90 days following the trust’s creation. If, as described above, mortgage documents were never correctly passed through to the trust when it was established, then the trust may not actually own the underlying mortgages it purports to own. Although it is possible that this issue could be remedied by some legal maneuvering, doing so could violate the REMIC status since the trust would be acquiring assets long after the aforementioned 90 day period has expired. Such a violation in turn could trigger a sizeable tax burden for investors. Our speaker indicated that there are a handful of open questions on this front and that this is a legal gray area.

My comments:
"...the trust may not actually own the underlying mortgages it purports to own," not to mention, it might not have any entitlement to the "underlying" asset, and if the asset was derived through fraud, those in the trust collecting through the fruits of fraud might themselves be liable for repayment. Just ask the Madoff "investors."

5.) Drat! We should have made our buddy Paulson force the taxpayers buy the title insurance companies—that's what we should have done! How dare they do this to us banks?! But its not too late---we'll show them. Call Timmy G!

Page 3:
If a scenario emerges in which title companies are unwilling to issue title insurance, in those scenarios lenders may cease lending. When a home with a mortgage on it is sold, the mortgage must be released at closing by the current mortgage owner before a new mortgage with title insurance is issued. If it is not known with certainty who owns the mortgage in question, it cannot be released. If the title company is not satisfied that there is a good release on the old mortgage, it will refuse to insure the new mortgage.

My comment: we have now reached the "scenario" of title insurance companies refusing to issue title insurance, including the nation's largest title holding company, Old Republic, refusing Ally Bank (GMAC Mortgage) and JPMorgan. I'm sure title insurance companies are searching like mad for the titles they
do insure, because many no doubt have fraudulent transfers on their hands, and in their books.

6.) So what we created MERS to help us commit fraud---you got a problem with that?

Page 4: MERS (Mortgage Electronic Registration Systems) functions as a centralized electronic registry of mortgages and tracks ownership of mortgages. MERS allows mortgage ownership to change hands efficiently and relatively quickly since it is electronic and allows all parties to forgo making a filing in local land records. Indeed,
MERS was designed to function as a substitute for local land records.

My comment: Well, hey, what's wrong with designing a bank-funded
front corporation to "function as a substitute for local land records," aka "laws"? Get outta here--I do it all the time! Just last week I finalized my latest system, "TERS" or Truck Electronic Reigistration System, which allows me to state what my rig weighs and that my axles are legal, and blah blah blah, and hit the road, baby! Its been working like a charm for all those 79,000 lbs copper loads--I just state my empty wieght as 1,000lbs! Pretty cool, huh? Oh, and wait till you see my other invention CERS--Currency Electronic Registration System--that allows me to register my junk mail are vertiable currency. Yo, let me tell you what--substitutes for laws and records are waaaaaay better than the real thing!

7.) Oh, this Levitin guys is just another one of those lawyers who are so concerned about “laws.” Doesn’t he know that laws for people, not banks?

Page 4:
Although MERS was designed to enhance efficiency in the mortgage assignment process, Levitin argued it may not conform with the law. “Slowly but surely” courts are issuing decisions which “cast validity on the MERS process.” Although ~60% of mortgages list MERS as the “nominee” which owns the mortgage, a handful of recent court cases have ruled that MERS has no standing in foreclosure actions either because (1) physical paperwork must be transferred when a mortgage is assigned by one party to another or (2) MERS has no true economic interest in the mortgage in question since it collects no payments from the borrowers.

My comments: whooops.

8.) Whatever with your “laws:” we own the government, so we have you either way.
Page 4:
Ultimately, if these issues do in fact escalate, the Administration may try to broker some sort of settlement. If such deal brokering does take place, Levitin believes that “some payment” will be exacted from the lenders and servicers. The Administration could bargain for more mortgage principal write downs.

My comment: in other words, the Administration could completely ignore the systemic fraud and outrageous criminal behavior of the banks, and placate the voters with a mortgage principal write down plan funded by other taxpayers, leaving the banks completely untouched for their several years-long fraud scheme, and further paving the path of the United States to certain doom. Of course, that is all to completely ignore that fact that the federal government has no jurisdiction over a particular state's mortgage filing rules, or its "arcane" law, but can only constitutionally intervene in cases of interstate transactions under the Commerce clause. But that's didn't stop the feds before, so why start now?

And exactly this is happening right now. The mysteriously well-greased Interstate Recognition of Notarizations Act (HR 3808) slid through both the House and Senate without even making the news, and just in time for the Congressional recess. As for now, the president has pocket-vetoed the bill by refusing to sign it, which now sends the bill back to the House (I say "as for now" because you trust this president about as much as you could trust the last one). The bill is just a couple of pages long, and sounds benign at first:

HR 3808, Section 2:
Each Federal court shall recognize any lawful notarization made by a notary public licensed or commissioned under the laws of a State other than the State where the Federal court is located if--
(1) such notarization occurs in or affects interstate commerce; and
(2)(A) a seal of office, as symbol of the notary public’s authority, is used in the notarization; or...

As this sounds a lot like each State recognizing the others' driver's licenses (it is not, but it sounds like that). Of course, the federal government would never allow the same argument with guns or drugs, but this doesn't sound too bad. However, then you get to (2)(B), the very next line of the bill, and see exactly why this slid through the most pro-bankster Congress in decades like a bankster's newly sharped and nicely heated knife through a large, mindless, cowardly block of butter:

... (B) in the case of an electronic record, the seal information is securely attached to, or logically associated with, the electronic record so as to render the record tamper-resistant.

In other words, in States that have those pesky "arcane" laws that require physical transfer of the necessary documents, the rule of law in States that allow for robo-signing and non-judicial foreclosure will reign supreme. In other other words, States best shut up and listen to the banks and believe whatever they say especially if they can't prove it, and even if the States have the very signatory admitting that they lied, and even if the States have knowledge of the same notary "verifying" the words of the signatory even while the notary is looking at documents from the same signatory that have three different signatures. The notaries are not off the hook in this, either, as it appears many of them facilitated this operation (probably for the right price). The real name for the bill should have been the "Mortgage Document Fraud Immunity" bill.

So why do I call the lump of butter known as our Congress "cowardly," as well as "pro-bankster" and "mindless"? Why don't I name names? Well, you know I love naming names, but you see, we can't name names and we can't know which crooks voted for these crooks because the bill was passed in the House by a voice vote, and in the Senate by unanimous consent! That is as cowardly as it gets: the members of Congress apparently learned from TARP-stain, as pro-TARP congressman after pro-TARP congressman fails in the primaries and struggles for reelection, that flicking off the people and voting with the criminal elite isn't exactly good voting policy. So, instead of deciding not to flick off the people anymore, they'll just do it under the cowardly cover of a voice vote. That's why--its disgusting.

So, now for president Obama has curtailed the Mortgage Document Fraud Immunity Act of 2010, but I remain suspicious. I have no evidence for the following speculation, but here it is anyway: I think Mr Levitin is right. I think the administration is holding out for some election-saving last minute "bargain" with the banks that presents the appearance of principal reduction, moves perhaps 25% of the currently underwater loan-owners just to the surface, restores the banks' balance sheets through a massive taxpayer funded infusion, and disables the now 50 State AG's investigating the fraud. In reality, the "bargain" will be a TARP 2 under cover of "principal reduction," and will result by another massive transfer of wealth from the American people to to elite--and immune--banks. The people moved from underwater to treading water and gasping for air will be able to continue to pay the banks for perhaps another 2 years, at which point they will run out of stream, sink under, and have their houses taken after all, and after having paid the fraud-infested bank, which probably doesn't even own the loan or the title, another 50% of their income.

Sorry to be so "Debbie-downer", but that's what happens when you ignore fraud and cover it over with "bargains." Its like watching snow fall over a dunghill: it doesn't get rid what's underneath.

1 comment:

  1. Absolutely brilliant write up. Thanks for bringing all your brilliant thoughts together into one post. There’s quite a few that I hadn’t encountered before. Thank you !