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Foreclosure Expert Confirms Mortgages Pledged Multiple Times, Not Actually Securitized, Document Problem Is Really a System of "Push-Button Fraud"

George Washington's picture





 

Washington’s Blog

Yesterday, I showed that mortgages were fraudulently pledged to multiple buyers at the same time.

Today, foreclosure expert Neil Garfield (former investment banker, trial lawyer and board member of several financial institutions) confirms
this, explains that the loans were not actually securitized, and the
whole "sloppy paperwork" excuse is really an attempt to explain away a
system of push-button fraud:

The game was to move
money under a scheme of deceit and fraud. First sell the bonds and
collect the money into a pool. Second take your fees, third take what’s
left and get it committed into “loans” (which were in actuality
securities) sold to homeowners under the same false pretenses as the
bonds were sold to investors. By controlling the flow of funds and
documentation, the middlemen were able to sell, pledge and otherwise
trade off the flow of receivables several times over — a necessary
complexity not only for the profit it generated, but to make it far more
difficult for anyone to track the footprints in the sand.

If the loans had actually been securitized, the issue would not arise. They were not securitized. This
was a mass illusion or hallucination induced by Wall Street spiking the
punch bowl. The gap (second tier yield spread premium) created between
the amount of money funded by investors and the amount of money actually
deployed into “loans” was so large that it could not be justified as
fees. It was profit on sale from the aggregator to the “trust” (special
purpose vehicle). It was undisclosed, deceitful and fraudulent.

Thus
the “credit enhancement” scenario with tranches, credit default swaps
and insurance had to be created so that it appeared that the gap was
covered. But that could only work if
the parties to those contracts claimed to have the loans. And since
multiple parties were making the same claim in these side contracts and
guarantees, counter-party agreements etc. the actual documents could not
be allowed to appear nor even be created unless and until it was the
end of the road in an evidential hearing in court. They used when
necessary “copies” that were in fact fabricated (counterfeited) as
needed to suit the occasion.
You end up with lawyers arriving in
court with the “original” note signed in blue (for the desired effect on
the Judge) when it was signed in black — but the lawyer didn’t know
that. The actual original is either destroyed (see Katherine Porter’s
2007 study) or “lost.” In this case “lost” doesn’t mean really lost. It
means that if they really must come up with something they will call an
original they will do so.

So the reason why the paperwork is all
out of order is that there was no paperwork. There only entries on
databases and spreadsheets. The
loans were not in actuality assigned to any one particular trust or any
one particular bond or any one particular individual or group of
investors. They were “allocated” as receivables multiple times to
multiple parties usually to an extent in excess of the nominal
receivable itself.
This is why the servicers keep paying on loans
that are being declared in default. The essential component of every
loan that was never revealed to either the lenders (investors) nor the
borrowers (homeowner/investors) was the addition of co-obligors and
terms that neither the investor nor the borrower knew anything about.
The “insurance” and other enhancements were actually cover for the
intermediaries who had no money at risk in the loans, but for the
potential liability for defrauding the lenders and borrowers.

The result, as anyone can plainly see, is that the typical Ponzi outcome — heads I win, tails you lose.

***

So
the paperwork was carefully created and crafted to cover the tracks of
theft. Most of the securitization paperwork remains buried such that it
takes search services to reach any of them. The documents that were
needed to record title and encumbrances was finessed so that they could
keep their options open when someone made demand for actual proof. The
documents were not messed up and neither was the processing. They were
just keeping their options open, so like the salad oil scandal, they
could fill the tank that someone wanted to look into.

 


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Thu, 10/21/2010 - 10:11 | Link to Comment McGriffen
McGriffen's picture

When a residential mortgage loan is pledged to collateralize a borrowing agreement, the lending counterparty charges what is titled a haircut.  Most often, on whole loans held in a bank portfolio, this haircut could range bt/n 90-97% of the face value of the loan / portfolio of loans.  The haircut represents a 'credit' aspect of collateralized borrowing.

There is a serious falsehood, to the notion that 100% is received after lending out the loan collateral.

Second, on the distribution/origination process: the mortgage loans originated firstly & most often, through a non-bank finance mortgage outfit (New Century, one example).  When New Century hits some critical mass of residential lending, perhaps $500 million in a given quarter, these loans are sold into a conduit that is sponsored by an issuing bank like Morgan Stanley, Citigroup, et al.

It is at this point the conduit uses a trustee / custodian, who is the repository for the mortgage documentation.  It is also here that mis-presentations are supposedly sent bak to the origination source (here, New Century).

After this point, the Street bank packages / sells the loans, in a bankruptcy-remote trust that falls under REMIC guidelines.  Varying investors of different skill-sets purchase a class of bonds that reference directly these mortgage loans.  High-grade buyers purchase the AAA class, as opposed to high-risk buyers that purchase the classes rated BBB & below.

ONCE the REMIC / loan trust has been issued, then a CDO could offer a package of new bonds for investors to pursue or reference.  But, the REMIC / original loan trust has to be in place first.  To my knowledge, CDS can only be written against a reference trust and/or bond class.

Mortgage investments are analyzed based on cash-flows (P&I, present value).  Everything after it involves a little knowledge of bond math.

Thu, 10/21/2010 - 10:40 | Link to Comment McGriffen
McGriffen's picture

Haircut better defined:  portfolio of residential loans total $10 million, are sent to a lending counterparty.  Lending counterparty agrees to lend, but only return $9.5 million in actual cash to the original / still owner of the residential loan portfolio.  The remainder is retained at the lending counterparty, which provides margin for the presumption of risk.

Thu, 10/21/2010 - 08:04 | Link to Comment Ardent Spirits
Ardent Spirits's picture

Could this be viewed as a crisis in the capitalistic system? Property rights are the very inner core of the system. Real estate is the most important type of real property as opposed to intangibles like stocks. The banksters now want a type of Fascism in which they can arbitrarily confiscate mortgaged real property without due process. This puts them on a collision course with the constitution. Who will win?

Wed, 10/20/2010 - 22:00 | Link to Comment Squid-puppets a...
Squid-puppets a-go-go's picture

I actually think this should become standard innovative practice. We could call it 'fractional reserve paperwork'. Every mortgage document can then be leveraged into multiple peices of paper.

 

well, if we unquestioningly do it with credit, why not paperwork?

Wed, 10/20/2010 - 19:08 | Link to Comment Ardent Spirits
Ardent Spirits's picture

Explains why the Republicans are so desperate to acquire paid employees (& juice) in Washington. A zillion dollars can't buy you freedom at the prison canteen.

Wed, 10/20/2010 - 17:56 | Link to Comment Lady Heather...UNCLE
Lady Heather...UNCLE's picture

thanks Diogenes for taking time out to elucidate. You know, i sit here in New Zealand reading this disgusting, disgraceful fraud and want to get on a plane and start shooting Wall St wankers ..uh, bankers. Is it easy to get a gun in America?

Wed, 10/20/2010 - 19:52 | Link to Comment Diogenes
Diogenes's picture

"Is it easy to get a gun in America?"

There are thousands of gun shops and guns are easy to get. The bankers already have theirs. After the near riots over TARP it was in the news that the brokers and bankers were getting hand gun permits and going to work "heeled".

Wed, 10/20/2010 - 20:05 | Link to Comment Diogenes
Diogenes's picture

Shooting bankers won't do a bit of good. Some kind of political movement demanding justice and the enforcement of existing laws agains fraud and theft would.

Wed, 10/20/2010 - 17:05 | Link to Comment BigSkyBear
BigSkyBear's picture
Y'all join in now...
"Up and down the City Road
In and out the Eagle
That's the way the money goes
Pop! goes the weasel!!!"  (Circa 1853)
Wed, 10/20/2010 - 16:27 | Link to Comment Popo
Popo's picture

Wake me up when the shooting starts.

Wed, 10/20/2010 - 16:04 | Link to Comment theprofromdover
theprofromdover's picture

Of course the mortgages were photocopied all over the place, and popped into multiple packages. That was the only way they could make money off them; the insurance scam was probably a cute afterthought.

There is no way the poor mortgage payer's monthly interest payment could generate proft for everyone down the line. How could it possibly do that?

This is pure unadulterated, premeditated crime. The bankers didn't even care if there was a day of reckoning; after all, they weren't going to have to pay back anything. At worst, the shareholders would take a hit, and at best Uncle Sam would forgve them & bail them all out.

So who is going to bring them to book?

Barry, what are you made of?

Wed, 10/20/2010 - 16:45 | Link to Comment Diogenes
Diogenes's picture

"Barry, what are you made of?"

His understanding of finance is practically nil. He will never even know what is going on unless one of his advisers sits him down and explains it to him and what are the chances of that?

Wed, 10/20/2010 - 15:42 | Link to Comment treemagnet
treemagnet's picture

Its not a problem until its a problem....isn't that the logic at play? 

Wed, 10/20/2010 - 15:36 | Link to Comment Horatio Beanblower
Horatio Beanblower's picture

If you need some help - http://www.mortgagecrime.com/

Wed, 10/20/2010 - 15:26 | Link to Comment Bob
Bob's picture

Great efforts, George.  Keep the heat on!

Wed, 10/20/2010 - 14:57 | Link to Comment Lady Heather...UNCLE
Lady Heather...UNCLE's picture

as per a question raised previously, how can one loan provide more than one cashflow?

Wed, 10/20/2010 - 16:01 | Link to Comment Diogenes
Diogenes's picture

"as per a question raised previously, how can one loan provide more than one cashflow?"

Here is how it works. Loan out $1 million at 4% interest and pledge that loan as collateral to someone else, and you get back your $1 million.

Pledge the same loan 5 times and you get $5 million.

Now, you have to pay $200,000 interest even though you only collect $40,000. The rest comes out of the $5 million. You get to keep nearly $4 million in illegal profits.

This is the essence of a pyramid scheme or Ponzi scheme.

In the meantime you buy insurance in the form of credit default swaps. You can buy credit default swaps for $50 million if you want, for a premium of only 1% or 1 1/2% per year.

When the whole thing blows up, as it did in 2006,not only do you keep your illegal profits  you collect the government bailout money plus the CDS money and laugh like hell.

Wed, 10/20/2010 - 14:41 | Link to Comment Triggernometry
Triggernometry's picture

Whose body will cash those checks written by banks' egos?

Wed, 10/20/2010 - 14:08 | Link to Comment Lapri
Lapri's picture

Wait a minute.. I am totally confused. This guy says:

"First sell the bonds and collect the money into a pool. Second take your fees, third take what’s left and get it committed into “loans” (which were in actuality securities) sold to homeowners under the same false pretenses as the bonds were sold to investors"

So the bonds come first? They sell bonds to investors which are backed by nothing, then turn around and use that money to lend to borrowers so that the bonds have actual loans to back them? Is that what this guy is saying?

Can someone point to me how the securitization is supposed to happen?

Wed, 10/20/2010 - 14:36 | Link to Comment The Answer Is 42
The Answer Is 42's picture

I wish such misinformation would stop. It only further muddies the already filthy water.

To answer your question, no, actual loans come first, they are put into a trust in a typical CDO setup, and the payments flow to the bond, and default losses go up the tranche ladder. This is cash CDO. Synthetic CDOs are different. Their cashflow is based on CDS, not loans.

At this point I'm skeptical of the multiple-pledge accusation and questioning of the trust owning the loans. These are separate issues from sloppy/fraudulant mortgage orgination or robosigning. I'm not a legal expert and will gladly be proven wrong, but it's hard to imagine things got wrong from such a fundamental level -- it would be too good to be true.

Wed, 10/20/2010 - 15:44 | Link to Comment hbjork1
hbjork1's picture

Thanks for your post. 

Wed, 10/20/2010 - 14:56 | Link to Comment George Washington
George Washington's picture

Mortgages Were Fraudulently Pledged to Multiple Buyers at the Same Time

And attorney Jeff Barnes writes:

[We have acquired] computerized mortgage loan investigation and securitized mortgage loan trust software and special computer terminals which can track a mortgage loan’s history including its assignment to specific tranches inside of a trust. The information being revealed by this unique research tool is both fascinating and disturbing.

 

A sample of what our researchers are finding: loans which were assigned to multiple tranches within one securitized mortgage loan trust; the assignment of the loan to different trusts; the divison of the loan into parts across tranches, and more. What this means to foreclosure defense discovery is nothing short of monumental.

 

If a loan is assigned to different tranches and/or different trusts, with each tranche or trust having its own series of credit enhancements and insurances, this means the possibility of multiple levels of insurance for the same loan, which goes to prove what we have been arguing for years: that upon securitization, the mortgage loans were insured with multiple layers of insurance so that when the loan went into default, those in the placement chain could reap untold profits by having the same risk paid over and over and over again through multiple claims or reserves. Anyone who read through the SEC v.

 

Goldman Sachs lawsuit knows this.

 

As such, any foreclosure defense should now hammer, hard, on ALL available credit enhancements, insurances, tranche assignments, and all agreements relating thereto. We will make a predition here: that very soon, there are going to be a series of cases where it is revealed, in discovery, that mortgage loans were paid 2, 3, 4, or more times on default and that the foreclosing party is simply trying to get paid a 5th or more time by stealing the borrower’s house under false pretenses and with material omissions and improper objections as to discovery related to setoffs (which objections we predict will be overruled once the judiciary is educated as to these matters). Once that happens, we see a literal tsunami of fraud upon the court claims and damage claims against the current foreclosure perpetrators.

 

 

Wed, 10/20/2010 - 17:36 | Link to Comment Lapri
Lapri's picture

sooo... which comes first, mortgage loans or bonds sold to investors? (my original question)

Thu, 10/21/2010 - 10:14 | Link to Comment McGriffen
McGriffen's picture

The actual loan comes first.  Most often, that loan exists / existed for 2-3 months before it ever appears into a residential mortgage-backed security.

Wed, 10/20/2010 - 15:29 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

What this means to foreclosure defense discovery is nothing short of monumental.

iFraud.

Wed, 10/20/2010 - 15:40 | Link to Comment dbradsha
dbradsha's picture

I said this elsewhere : No one will be charged , no one fined, no one will pay. You can't find any reference to this in MSM. The government, fed will bail out and cover up. The average American doesn't even know this is going on. There is no moral compass in the US system. Print more cash, cover up, carry on.

Wed, 10/20/2010 - 19:16 | Link to Comment Ardent Spirits
Ardent Spirits's picture

One of the beauties of the Corporate Person. There is nobody but a charter to haul into court. A lawyer's dream to defend a corporate officer & a lawyer's nightmare to try to prosecute. Side bets when the laws regarding Corporations will be revised to fix all that?

Wed, 10/20/2010 - 14:02 | Link to Comment Lady Heather...UNCLE
Lady Heather...UNCLE's picture

nothing to see here folks...move along

Wed, 10/20/2010 - 13:45 | Link to Comment petridish
petridish's picture

No one in this god-forsaken country should pay one more dime in mortgage payments until this cluster-fuck is resolved.

That would be fiscal stimulus you can believe in.

Wed, 10/20/2010 - 13:43 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

GW:  Im missing something here.  How does the once-monthly cash flow of principal and interest from the underlying mortgage support multiple pledges?  IOW, some of the securities in the structure must not have received any cash flows if the whole scheme is a tree structure of multiple pledges rather than a chain structure of serial pledges.

Mind you, Im not doubting what you're presenting (fraud, misrepresentation, fabrication, etc.), rather, Im just wondering why the payments structure didn't blow up almost immediately.  As I say, Im probably missing something obvious, but would appreciate your thoughts just the same.

Wed, 10/20/2010 - 15:16 | Link to Comment Diogenes
Diogenes's picture

"GW:  Im missing something here.  How does the once-monthly cash flow of principal and interest from the underlying mortgage support multiple pledges?  IOW, some of the securities in the structure must not have received any cash flows if the whole scheme is a tree structure of multiple pledges rather than a chain structure of serial pledges."

If you sell a so called bond issue for $100 million, promising 4% interest, that is $4,000,000 per year. If you sell the same mortgages 5 times over you get $500 million but have to pay $20,000,000 the first year which takes the $4,000,000 plus $16,000,000 out of the $500 million. Leaving $384 million in illegal profits. This is the essence of a Ponzi or pyramid scheme.

"Im just wondering why the payments structure didn't blow up almost immediately.  As I say, Im probably missing something obvious, but would appreciate your thoughts just the same."

That's why they bought insurance in the form of credit default swaps.Besides, it did blow up almost immediately, in 2006. They covered it up with government bailouts and various illegal acts.

By the way, if they bought credit default swaps to cover all 5 bond issues they can afford to pay off all the bond buyers even if the mortgages go to zero.

In fact they bought far more than that, so they stand to keep most of the $500 million plus whatever bailout money they got, plus most of the CDS money. As long as the fix holds and the cops don't get them.

No wonder they love the banking business.

Wed, 10/20/2010 - 15:52 | Link to Comment jal
jal's picture


A 100% of the mortgages do not need to have been "sold" multiple times for the whole system to be declared a fraud and a ponzi.

I'll pick a number 10%.
jal

Wed, 10/20/2010 - 23:17 | Link to Comment MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Yes, but WHICH 10%?  8-)

Wed, 10/20/2010 - 15:16 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

Thanks, Diogenes.  I was afraid that might be the answer.

Still hard to wrap your head around such a pervasive fraud w/so many participants.

Wed, 10/20/2010 - 13:42 | Link to Comment cbaba
cbaba's picture

Wowww

Wed, 10/20/2010 - 13:43 | Link to Comment Technichel
Technichel's picture

+

Wed, 10/20/2010 - 13:22 | Link to Comment kaiserhoff
kaiserhoff's picture

Making progress.  Who are the insurers who keep making these payments?

Wed, 10/20/2010 - 13:07 | Link to Comment bugs_
bugs_'s picture

high frequency fraud

Wed, 10/20/2010 - 13:04 | Link to Comment dbradsha
dbradsha's picture

But no-one will do anything. The banks will get bailed out. No law suits bought. Same old. The USA is a laughing stock. No-one cares. The problem with these blogs is that nothing reaches the great American public. Its just a waste of words. No influence here. The crooked stock market, crooked government, crooked banks will just laugh and take your money. Good night America !

Wed, 10/20/2010 - 15:41 | Link to Comment calltoaccount
calltoaccount's picture

Crooked stock market indeed.  


Wall Street banks and hedge funds, via the wholly owned, operated and non-accountable black box Depository Trust and Clearing Corp. (DTCC) have been allowed for years by Congress, the SEC and the DOJ to manipulate markets and steal trillions from investors (and taxpayers) via the same exact Ponzi style "counterfeiting" crimes in the equities and bond markets  (ie. selling the same shares, bonds, TBills, etc. to multiple buyers, without ever being required to actually deliver that which they sold to anyone!  It was their extraordinary and unimpeded $uccess at this-- since at least 1997-- that emboldened them to do it with mortgages. 

 

 

Wed, 10/20/2010 - 13:42 | Link to Comment Technichel
Technichel's picture

True and it took me a long time to realize that they are all run by the same old hogs.

Wed, 10/20/2010 - 13:21 | Link to Comment JLee2027
JLee2027's picture

Not this time. 

Wed, 10/20/2010 - 13:52 | Link to Comment dbradsha
dbradsha's picture

Whats different this time ? Cant see anything new here. New scandal perhap, same responses.

Wed, 10/20/2010 - 15:28 | Link to Comment Bob
Bob's picture

You ever get the feeling that people are just a little too quiet?  Something that's hard to put your finger on, but it's . . . different.  Something's out there. 

it was right in everyone's face. tyler and i just made it visible. it was on the tip of everyone's tongue. tyler and i just gave it a name...

Wed, 10/20/2010 - 13:50 | Link to Comment dbradsha
dbradsha's picture

Whats different this time ? Cant see anything new here. New scandal perhap, same responses.

Wed, 10/20/2010 - 13:03 | Link to Comment sethco
sethco's picture

why don't they start turning over some fucking rocks and finding the scurrying grey bugs and kill them?

Wed, 10/20/2010 - 15:27 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

why don't they start turning over some fucking rocks and finding the scurrying grey bugs and kill them?

Who is this "they" you speak of?

Are you speaking about the "authorities? Or maybe the Congressional Critters? Or possibly the SEC, FINRA or even the DOJ?

Wed, 10/20/2010 - 12:50 | Link to Comment JohnKing
JohnKing's picture

Foreclosure mill revamping personnel (rats jumping ship):

 

Following last week's announcement of staff cutbacks and an internal investigation, foreclosure attorney David Stern, head of one of the firms under investigation by Florida's attorney general, has a new role at the publicly traded subsidiary of his Plantation law firm.

He's no longer chairman of the board, but he continues as CEO. Meanwhile, the rest of the executive suite has been cleared out.

http://blogs.trb.com/business/columnists/brackey/blog/2010/10/foreclosur...

Wed, 10/20/2010 - 12:48 | Link to Comment jimijon
jimijon's picture

Succinctly put, they embezzled the future. Though makko is correct, the compound nature of the equation is such that is has now passed true productive output. So as the mogambo would say... we're freaking doomed WFD.

 

Wed, 10/20/2010 - 12:44 | Link to Comment Problem Is
Problem Is's picture

Exactly...
Everything else is an alibi and a bullshit story... Wall Street sold the same mortgage over and over and over again...

Hear No Evil; See No Evil
The Amerikan public does not want to get it... Politicians are bribed not to look... and no one but a $300 credit deadbeat in Minneapolis will go to jail...

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