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Foreclosure Expert Confirms Mortgages Pledged Multiple Times, Not Actually Securitized, Document Problem Is Really a System of "Push-Button Fraud"
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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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.
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.
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?
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?
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.
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?
"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".
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.
Wake me up when the shooting starts.
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?
"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?
Its not a problem until its a problem....isn't that the logic at play?
If you need some help - http://www.mortgagecrime.com/
Great efforts, George. Keep the heat on!
as per a question raised previously, how can one loan provide more than one cashflow?
"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.
Whose body will cash those checks written by banks' egos?
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?
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.
Thanks for your post.
Mortgages Were Fraudulently Pledged to Multiple Buyers at the Same Time
And attorney Jeff Barnes writes:
sooo... which comes first, mortgage loans or bonds sold to investors? (my original question)
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.
iFraud.
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.
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?
nothing to see here folks...move along
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.
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.
"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.
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
Yes, but WHICH 10%? 8-)
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.
Wowww
+
Making progress. Who are the insurers who keep making these payments?
high frequency fraud
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 !
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.
True and it took me a long time to realize that they are all run by the same old hogs.
Not this time.
Whats different this time ? Cant see anything new here. New scandal perhap, same responses.
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...
Whats different this time ? Cant see anything new here. New scandal perhap, same responses.
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?
Foreclosure mill revamping personnel (rats jumping ship):
http://blogs.trb.com/business/columnists/brackey/blog/2010/10/foreclosur...
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.
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...