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JPM's First Official Spin On Fraudclosure: Manageable, But With $55 Billion Of Risks

Tyler Durden's picture




 

Over the weekend, JPM's Ed Reardon shared the bank's first official takeaway on fraudclosure (yes, it refuses to go away). According to the bank "In our view, many of the mortgage foreclosure problems highlighted in the past few weeks are process oriented and can be fixed in the near term." One wonders when the biggest bank in the world actually has come out with a less than rosy view on an event that could be a game changer: we are too lazy to go back in the archives to read JPM's take on subprime in early 2007 but we are confident it would have been summarizied in one word: "manageable." Yet even JPM is forced to acknowledge that putbacks are the biggest risk, as we highlighted yesterday via a confidential memorandum from Wells Fargo. To wit, from JPM: "We estimate putback risk to be approximately $23-$35bn for agency mortgages, $40-80bn in non-agency and roughly $20-30bn for second liens and HELOCs. However, there are a number of reasons why these estimates are on the high end, including losses already taken and loss reserves established. Specifically, putback losses could reach $55bn in our base case scenario, but, importantly, will be spread out over years owing to the complexity and cost of implementing putbacks, especially in non-agency securitizations. Consequently, the annual putback cost to the industry is likely to be in the range of $10-25 billion. There are several reasons for our lower putback success rate assumptions in the private-label market relative to the agencies, including creating a process to put loans back, and demonstrating not only that the loan breached a representation or warranty, but also that the breach  affected the value of the loan." This is basically JPM's way of saying that QE2, instead of being a UST purchasing program, will actually be one where the Fed will buy a new batch of completely fraudulent MBS. This also jives with what Pimco is expecting, based on the firm's recent surge in MBS purchases on margin.

Full JPM presentation on fraudclosure putback risk.

 

 

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Mon, 10/18/2010 - 10:14 | 658067 mjbommar
mjbommar's picture

Don't want to beat a dead horse, but are we sure the WFC doc was real?

Notes on ZeroHedge’s release of Wells Fargo Repurchase Process Document

Mon, 10/18/2010 - 10:16 | 658074 Tyler Durden
Tyler Durden's picture

Yes we are

Mon, 10/18/2010 - 10:23 | 658090 mjbommar
mjbommar's picture

I believe that it could be real and you probably can't release info on the source, but the rest of us sitting on the other side of the fence need to do their due diligence.  

Mon, 10/18/2010 - 11:27 | 658295 mjbommar
mjbommar's picture

Found another PDF from June on the WFC site that looks like a much closer match.  Leaning towards believing that it's real now.

Mon, 10/18/2010 - 10:49 | 658159 Mercury
Mercury's picture

REGGIE MIDDLETON ON CNBC IN A COUPLE MINUTES !!

Mon, 10/18/2010 - 10:59 | 658180 bonddude
bonddude's picture

Herb Greenberg is an ass. Couldn't shake RM.

Mon, 10/18/2010 - 11:21 | 658265 Mercury
Mercury's picture

Well, he claims to be a fan and he walked Reggie through his talking points better than Haines or Burnett would have allowed for.  Solid performance by Reggie I thought but I'd like to see him in a position to debate some cheerleaders.

Mon, 10/18/2010 - 12:27 | 658483 Village Idiot
Village Idiot's picture

Nice work Reggie.  Nice look too.  A little more time in front of the camera and you won't even know it's there. 

Regards.

Mon, 10/18/2010 - 11:00 | 658186 curbyourrisk
curbyourrisk's picture

They will censor him. THey will bash his product.

Can anyone post a video of that????

Mon, 10/18/2010 - 11:39 | 658343 FEDbuster
FEDbuster's picture

Nice job Reggie!  So what inning is it for the banking crisis, or will the game be canceled do to a hurricane moving in during the third inning?

Mon, 10/18/2010 - 12:59 | 658563 Bob
Bob's picture

Way to represent, Reg! 

That should do wonders for your biz.

Mon, 10/18/2010 - 10:15 | 658070 Duuude
Duuude's picture

 

 

Straw man tactic...

 

BAU

 

 

 

 

Mon, 10/18/2010 - 10:17 | 658078 buzzsaw99
buzzsaw99's picture

time to sell more bonus bonds.

Mon, 10/18/2010 - 10:17 | 658079 assumptionblindness
assumptionblindness's picture

"This is basically JPM's way of saying that QE2, instead of being a UST purchasing program, will actually be one where the Fed will buy a new batch of completely fraudulent MBS. This also jives with what Pimco is expecting, based on the firm's recent surge in MBS purchases on margin."

This is EXACTLY why we need to audit and then END THE FED.

 

Mon, 10/18/2010 - 11:29 | 658304 FEDbuster
FEDbuster's picture

So the giant credit cesspool, known as the Federal Reserve, will buy all the defective MBS's back from the banksters, whom are forced to buy them back due to their fraudulent actions.  The FED will do this by expanding their balance sheet ("printing money") from $2.3 trillion to $3, 4, 5 trillion??  All in the name of "saving the system". 

Well maybe this system shouldn't be saved.  I would rather let the whole thing crash and burn, then live under the stinking heap of fraud and deceit we now operate under.

 

Mon, 10/18/2010 - 10:17 | 658080 Peterpaul
Peterpaul's picture

Hey, wasn't subprime mortgage meltdown dismissed as simply a $50 billion dollar problem?

 

http://www.channelnewsasia.com/stories/afp_world_business/view/289231/1/.html 

(ARTICLE FROM JULY 2007)

Bernanke, responding to questions in a second day in Congress for the Fed's semi-annual economic report, indicated the problems with subprime loans - made to people with weak credit histories - may be greater than expected.

"What we've learned since early this year is that a lot of the subprime mortgage paper is not as good as was thought originally, and there are clearly going to be significant financial losses ... associated with defaults and delinquencies on these mortgages," he said.

"Some estimates are in the order of between 50 billion and 100 billion dollars of losses associated with subprime credit products."

Mon, 10/18/2010 - 10:24 | 658087 TheGreatPonzi
TheGreatPonzi's picture

Good find. I also remember a 2005 big report from BNP Paribas claiming that "there is no real estate bubble in the USA, families are solvent, and subprime loans are doing good".

There were a lot of tables, figures and graphics. It just shows that you can show anything you want with numbers and statistics, and that you can't trust a bank.

Mon, 10/18/2010 - 11:47 | 658374 DaveyJones
DaveyJones's picture

Wasn't the Iraq adventure first dismissed as a $70 billion dollar exercise?  

Mon, 10/18/2010 - 10:22 | 658084 Yikes
Yikes's picture

If they go ahead and buy MBS' as part of QE2,  the corruption of our Government will be complete.  Our country will no longer be a Democracy. Furthermore, it will accelerate the breakdown of civil society: The moral hazard implications are huge.

Mon, 10/18/2010 - 10:23 | 658088 cossack55
cossack55's picture

Moral Hazards were declared illegal by your leaders. Move on.

Mon, 10/18/2010 - 10:28 | 658097 gwar5
gwar5's picture

Yep, there's going to be about 300 million moral hazards with rocks waiting for them if they do that and they will

This is when Sharia law doesn't look so bad, there aren't many repeat offenders

Mon, 10/18/2010 - 11:18 | 658251 Ned Zeppelin
Ned Zeppelin's picture

This is exactly what will happen, and it's Plan B as Plan A (TARP and let's hope this things works out later as we kick the can down the road) craters.  These monster MBSs will simply find their way into some sort of antechamber in the Black Hole that is the FED, bricked up and walled off forever beyond the event horizon in exchange for freshly minted FRNs. THe FED will take a huge loss, but no one will know. And since reality stops at the event horizon, it doesn't matter anyway. They will clean up the ones that can be cleaned up, and the rest will simply disappear over time.

Who is to stop them from doing this? No one.

 

Mon, 10/18/2010 - 11:46 | 658364 Yikes
Yikes's picture

I keep wondering if Congress can bar the Fed from purchasing MBSs.  If a bill were introduced in Congress, the Fed, Washington D.C., and Wall Street would be in full blown panic.

 

Seems crazy doesn't? Asking if the Government has any power over the Fed. Hell, Congress can't even get a full Audit, let alone a restriction.

Mon, 10/18/2010 - 10:21 | 658085 Robslob
Robslob's picture

800 Billion in TARP later...dadadadadada Batman!

Mon, 10/18/2010 - 10:24 | 658091 gwar5
gwar5's picture

$55 Billion risk to whom?  Tarp 2?

What about the nasty derivatives bundled on these?  Are they polluting Europe or was this a stealth doomsday bomb to China?

.

 

 

Mon, 10/18/2010 - 10:26 | 658094 Bob
Bob's picture

The important thing in all the spin is to persuasively argue that losses will be gradual as well as "limited."  Gradual strikes me as particularly important to guys who are dedicated to presenting a picture in which paying out $144B in "bonuses" does not stand out as reckless in comparison to expected cash flow and losses. 

The primary driving force of all their analyses and actions, imo, is to delay and underestimate until they've looted the companies of the $144B that would otherwise obviously be needed as retained earnings to address expected losses. 

Mon, 10/18/2010 - 10:43 | 658133 MachoMan
MachoMan's picture

You don't understand the concept of limited liability entities...  Think of the bank as a fuselage to a rocket ship.  Once the ship is in the upper atmosphere and can escape the earth's gravity successfully, the fuselage is jettisoned and only the crew remains.  In short, the banks (including the fed) are going to be jettisoned when they become useless and their principal actors (crew) will remain.

In short, it's not just about bonuses...  it's the whole enchilada.  Not only will the bonuses be given (these are just used to take risk off the table by the principal actors...  they presently get to pull money that would otherwise be at risk in the entity, out to themselves...), but eventually the assets of the failed institutions will be purchased for pennies on the dollar with not only the bonus money, but other ill obtained spoils of the wealth gap...

The primary driving forces aren't the bonuses, that's just a temporary mechanism...  the primary driving forces are the institution's most prized assets (land, claims on land, claims on governments that might sustain our collapse, pms, etc.).  Further, they do not "loot" the organizations...  they "loot" the american (and our enabler countries') taxpayers.  The bonus is just the financial representation of the value to a particular principal actor of his share of the looting.  Take the backstop away and you'll take the bonuses away.

Money (bonuses, et al) just sits in the ether until converted to a real asset.

Mon, 10/18/2010 - 13:05 | 658365 Bob
Bob's picture

Of course it's not all just about the bonuses.  But those bonuses are what they--as individual actors in their ongoing deceptive enterprise as "public" corporate entities serving the market and their shareholder base-- live for at the most immediate level.  They've got plenty other play left thereafter, but they want to get the money they can directly make claim to out before we get to what they would like to see as the next step in the process. IMO.

Mon, 10/18/2010 - 10:51 | 658163 snowball777
snowball777's picture

One can't help but notice that the $144B bonus pool is bigger than the $115B of putbacks for bogo-robo-loans.

They are quite literally walking away with the ill-gotten gains and it will be very difficult to clawback later in any form other than flesh.

Mon, 10/18/2010 - 11:45 | 658369 Bob
Bob's picture

Getting it back once it's left the building seems highly unlikey.  That's why I keep harping on it to draw attention to it before it happens.

Mon, 10/18/2010 - 10:27 | 658096 Internet Tough Guy
Internet Tough Guy's picture

Buyers put the toxic paper on the banks and the banks put them on the Fed. Wash, rinse, repeat.

Mon, 10/18/2010 - 10:28 | 658099 sethco
sethco's picture

Bank stocks up today, of course. Whatta fraud.

Mon, 10/18/2010 - 10:54 | 658173 Rainman
Rainman's picture

No surprise after JPM's underprovisioning " profits ". Citi made virtually all its Q3 " profit " the same way.

So now it's obvious all the baby ducks plan to follow Momma Duck.

Mon, 10/18/2010 - 14:03 | 658736 Lets Hang Parliament
Lets Hang Parliament's picture

Exactly - shouldn't the provisions have been increased if they new this is coming down the tracks? Who are their auditors? "Arthur" PriceCooperWateredDownOuthouse??

Mon, 10/18/2010 - 14:05 | 658742 Lets Hang Parliament
Lets Hang Parliament's picture

As you were; it should have been "ShitHouse" not Outhouse...

Mon, 10/18/2010 - 10:30 | 658101 kaiserhoff
kaiserhoff's picture

Why are they doing this?  Did some game theory with a couple of bright lawyers.

They are copping a plea, confessing to civil fraud to avoid the ruinous charge of securities fraud.  They are guilty as sin on both counts:

Civil Fraud 101- They sold a horse and delivered a mule.  Exactly - They sold securities promissing no more than 10% subprime, alt-A, no doc. whatever.  The shit they delivered was worse, much worse.  There is no defence really except to delay forever, corporations never die, except that...

Securities Fraud 201 - Securities law is unforgiving.  If you don't dot all the I's cross all the T's you are fucked.  They failed to get the right documents into the right trusts, and in any case MERS is probably fatally flawed as a way to transfer title.  Oh shit.

The penalties for securities fraud are essentially infinite.  Any state could fine them for each instance of selling unregistered (or improperly registered) securities.  Beaucoup bucks.

Will the federalles bale them out?  Don't think so.  This ain't the only rodeo in town.  There are bottomless pits in the states, municipalities, everything south of the Alps, every damned bank and sewer district.  It's all hinkey now.  Altogether now class, can you say END GAME?

Mon, 10/18/2010 - 11:11 | 658204 MachoMan
MachoMan's picture

No.

What this analysis fails to acknowledge is that the states are dependent upon a federal backstop.  Until the states are financially independent of the federal government, they will be at the mercy of the federal government.  Period.  End of story.

The legal analysis may be correct, but the "law" is not only about the laws on the books, it's also about practical understandings and mechanisms...  it's about policy...  and it's about efficiency.  What is going to happen is there will be a federally appointed body that will set a binding precedent on the states and will act as a clearing house for determining the correct party to bring the foreclosure suits.  In the meantime, there will be moratoria implemented (through either the corruption or sheer stupidity of the states), which protect the first lienholders and ensure no more houses are given to J6P.  This will significantly dampen the prospective impact.

Also, as for the retrospective application, I do not suspect that hundreds of thousands of bonafide purchasers at foreclosure sales will be divested of their properties.  This is not only inefficient, but inequitable.  The defaulting homeowners will then be forced to seek damages for the foreclosure from the banks.  One of the necessary/practical requirements of the defaulting homeowners is to show damages as a result of the foreclosure.  Given that the sales price 1-3 years ago is likely higher than today AND the homeowner was in default AND the sale was conducted in a commercially reasonable manner w/ all the necessary formalities of sale (not rubberstamping, but the actual sale, e.g. publish in a newspaper, etc.), then the defaulting homeowner likely has no damages.  In addition, the possible extent of punitive damages is limited by ratio to the amount of actual damages...  

Title companies have no assets so to speak...  but, they'll likely be shelling out a lot of cash for the defense work here.  The biggest expense I see a lot of the banks, eventually, having to foot will be the legal bills from the plaintiffs' attorneys who attempt to get rich on the punies (recompensing the title companies).   

Further, QE will not be used for the "fix" to foreclosure gate.  Monetary policy has reached the end of its rope...  They are going to go back to ol' faithful and actually come up with a law (passing money between a few politicians is vastly cheaper than the potential fall out/amount of pile that would need to be sacrificed to the money god).

This is not the end...  just more of the ongoing saga of an empire's slothful collapse.

Mon, 10/18/2010 - 11:21 | 658267 kaiserhoff
kaiserhoff's picture

Nothing in my comment said anything about foreclosure or the downstream problems.  I was trying to sort out the bond sale (upstream) issues.

In general, I agree with you about what the feds would like to do.  They want this whole thing to go away, yesterday!  Unfortunately for them, there is an essentially infinite number of plaintiffs here, some with valid claims, and in spite of Commiebama's best efforts, the courts are still open.

Two general points that are poorly understood:

Retroactive laws are, on their face, unconstitutional.

The Supremes are spoiling for a chance to smack these bastards.

Mon, 10/18/2010 - 14:39 | 658879 MachoMan
MachoMan's picture

First, civil liability for fraud on the securities is going to be limited for a number of reasons.  The most likely it seems to me is the issue of knowledge or fraudulent intent by the seller.  Ultimately, the buyer is going to have to prove that the seller knew these things were going to blow up at the time of sale or otherwise knew that significantly more than X% were trash when sold.  This is where the banks trot out the nasa guys to talk about the risk models and the jury's eyes glaze over.  In effect, if it's complicated enough, there was sufficient effort put into modeling the risk...  practically speaking...  I'm not saying a good plaintiff's attorney can't turn it around, but just practically speaking, it's a tough sell once you get all the experts up there talking about the modeling.  If they did a reasonable level of diligence in handing over the modeling to people capable of doing it, then that's about all that counts...  on that issue anyway.  (this is what they counted on when devising the scheme...  plausible deniability).

As for violations of securities laws, if these were going to happen, they should have been brought a long time ago...  I'm guessing there is already precedent out there...  and probably negative (i.e. we would have heard about it if the sales/securities were invalidated).  Generally, they're all designed to: (a) ensure they're registered w/ X; (b) faithfully disclose everything material about the investment; and (c) protect unsophisticated investors, to a certain extent.  Essentially, parts (b) and (c) are likely non-issues... 

the only question is whether they technically failed to follow the proper procedure (a common mistake for them it appears).  My gut reaction here is that given they're out in the open, attempted to comply with all rules and regs, and are so pervasive and common as to dramatically dwarf most all markets, that "substantial compliance" will play a key.  Also, I would be curious if part performance/course of dealing/et al or other actions subsequent to the sale would possibly "cure" any defects.  Presuming federal securities laws are OK, it's going to break down state by state...

The states ARE NOT GOING TO SUE for securities violations...  mutually assured destruction got us here and it's going to keep us here.  However, individuals can sue for securities violations too...  my biggest question on this is what potential remedies are available to an aggrieved purchaser?  Can they unwind these things?  How many people are we talking about?  The breakdown/weight of holders of these things would be nice...  if the GSEs own them, they're not going to dump them back on the banks, as this would be counter productive to the backstop, right?  The other question I have is whether it is necessary to connect the dots between the failure to properly follow the registration requirements (get the right X into Y trust) and the damages received by the purchaser...  in other words, it wasn't the registration that caused the damages, it was the implosion in the housing market.  I agree these things are often cut and dry and may even limit the court's ability to make some type of equitable/split the baby approach.  It may be that void/invalidating the securities and returning the money is the only possible thing under the law...  prospectively this will get fixed with new laws...  but retrospectively, it's a potential can of worms.

Also, the supreme court is...  difficult at best to predict given the make-up and appointment...  what would barry want me to do here?  Why was I given this seat?  Do I have a breadth of decisions in my new position that would give a high indicator as to my likely vote/ruling?  Might as well throw darts on that one.  Further, it's sometimes very "results" oriented, so knowing the law might not necessarily get you the right answer either... 

 

Mon, 10/18/2010 - 15:34 | 659008 kaiserhoff
kaiserhoff's picture

Sweet Jesus, where to start on that mess?  Reading comprehension skills are good to have.

1. Civil fraud is what they are admitting to, to avoid more serious consequences.

2. If they are not looking for cash, why would all 50 state attorneys general be lined up like hogs at the trough.  Know of any states that are short of cash?

3.  As to securities law, one error is more than enough.  I thought I made that clear.

4. It won't be the Obama nominees leading the charge.  Good Lord, did you ever take a civics class? 

5. None of us can guess the future, but if you pay attention to motivation, that improves the odds;)

Mon, 10/18/2010 - 17:15 | 659371 MachoMan
MachoMan's picture

1.  Tell me who admitted to selling a horse, but delivering a mule?  (your example).  Who admitted to stuffing the securities with more than a stated amount of trash?  If this was admitted, then we're done...  the whole thing is over...  this would be the nail in so many coffins...  To the best of my knowledge, the only thing admitted to was robostamping, which may or may not have incredibly broad consequences.

2.  The state ag's are lined up at the trough to protect the banks.  They are attempting to implement blanket/universal foreclosure moratoria.  The only thing this will do is protect the first lienholders.  Now that the cat is out of the bag so to speak, each fraudulent foreclosure only helps J6P's odds at getting a house...  the ag's aren't actually protecting anyone other than the TBTF/U.S. Gov't.

3.  I'd like to see some precedent on securities law...  not saying you're wrong, but I'd like to see facts similar to the present situation.

4.  Who are the Supremes to which you were referring?  The band? 

5.  The motivation here is to keep the world/status quo going.  Anything and everything to further that goal will be done.  There will be individual indictments for the robostamping mess, but the entities will survive and so will the mortgage instruments.  Again, states can get backbones when they're not dependent on the federal government to bail them out.  Mutually assured destruction is at play and will continue to be in play until such time as states get their financial houses in order (i.e. when hell freezes over).

Mon, 10/18/2010 - 20:45 | 659969 kaiserhoff
kaiserhoff's picture

You claim to be a real estate lawyer?  I'm afraid you misunderstood.  This is a financial blog.  When your daddy gives you an allowance, come back and talk to us.

Tue, 10/19/2010 - 10:55 | 661207 MachoMan
MachoMan's picture

This website is dedicated to providing a foil to much of the mainstream media's spin and, ultimately, providing the facts necessary to uncover the truth of not only financial matters, but a broad range of issues including, but not limited to, political, philosophical, and environmental matters.  While ad hominem attacks are great at conceding issues, they fail to progress the available knowledge to readers through point/counter-point discourse.

Mon, 10/18/2010 - 10:31 | 658102 Spalding_Smailes
Spalding_Smailes's picture

 In addition, the share of securitized mortgages that are subprime climbed in 2005 and in the first half of 2006.  The rise in subprime mortgage lending likely boosted home sales somewhat, and curbs on this lending are expected to be a source of some restraint on home purchases and residential investment in coming quarters.  Moreover, we are likely to see further increases in delinquencies and foreclosures this year and next as many adjustable-rate loans face interest-rate resets.  All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.  The vast majority of mortgages, including even subprime mortgages, continue to perform well.  Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable"......

 

..........."Servicers of loans aim to minimize losses, and they appear to be actively working with thousands of individual borrowers to modify their mortgages. ......(((( To some extent, the dispersed ownership of mortgages may combine with legal and accounting rules to make successful workouts more difficult to achieve.  For example, the "pooling and servicing agreement" associated with a given securitized mortgage pool may restrict the share of accounts that can be modified.  Accounting rules that, in some cases, require substantially modified pools to be brought back on the originator’s balance sheet may dissuade lenders from undertaking workouts.  And extensive modifications that reallocate expected cash flows across different securities associated with the pool could trigger a review of those securities by the ratings agencies.)))))))  At the same time, if workouts are economically viable, then an incentive exists for third parties to purchase distressed pools at a discount and to undertake the workout process.  We see these purchases taking place in the marketplace, a development that should help to increase the number of successful workout"..........

 

Chairman Ben S. Bernanke At the Federal Reserve Bank of Chicago’s 43rd Annual Conference on Bank Structure and Competition, Chicago, Illinois May 17, 2007

The Subprime Mortgage Market

Mon, 10/18/2010 - 10:29 | 658103 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

I knew your fraudulent Fed was going to get the bankstas out of the MBS mire. PIMCO confirms the obvious solution. Bent Bernanke strikes again!...glad I live in New Zealand, USA (present company excepted!) is rotten to its crony capitalism core

Mon, 10/18/2010 - 10:30 | 658105 Dr. Richard Head
Dr. Richard Head's picture

Since we are on the topic of foreclosures and such, I have quick question.

I sent out a request to the bank to whom I pay my mortgage.  The request asked for all third-party assignments, track of payment going to those third-party assignment, and copy of the original mortgage document.  I also check with the county where I reside and pulled up the title to show that no assignments have been recorded on my current mortgage, which is is good standing as far as my payments are concerned.

The only piece I have received in response to my inquiry was a copy of the payments that I have made to the bank and nothing more.  Are my assumptions correct that the bank I pay my mortgage to is no longer the holder of my note as they have not provided any of the information I have requested?  Any ideas?

Mon, 10/18/2010 - 11:00 | 658190 the rookie cynic
the rookie cynic's picture

Hire a hard nosed real estate attorney and have him right a terse letter to the bank stating what you want.  If this doesn't work, contact your state attorney general and the BBB. Other than that, I'm not sure what else you can do.

Mon, 10/18/2010 - 11:13 | 658230 PlausibleDenial
PlausibleDenial's picture

Try taking a look at Freeandclearin90day.com.  I have read this guy's stuff and it seems reasonable to at least take a stab at implementing his program.  50/50 but fairly well researched.  Good Luck

Mon, 10/18/2010 - 11:55 | 658410 bankonzhongguo
bankonzhongguo's picture

Again, I'm not a lawyer, but I play one on TV.

Make all your requests via certified mail.  You may need to document WHEN you make these requests, exactly because they are going to give you the run around.  You are better off having 3 certified requests with an incomplete response, than incomplete documents and "a story."  Think about where you might be in a year if it becomes a problem.  Document everything AND save the envelopes of all their responses.

Ask for the ORIGINAL NOTE.  Everyone is looking for this.  Where is it?  Where's Waldo?  Its a game.  FIND THE ORIGINAL NOTE!  The bank should be able to produce a certified copy upon demand, but also demand that they produce the original for your inspection in the county where the property is located.  A copy of the Note is NOT satisfactory.  Period.  If they do not have it, who does?  Ask point blank; "Was my loan/note sold and to whom?"  If would be funny if they said, "no," then "yes" then "no" again.  Is that note holder the HDC? You will look and sound like a freak, but get the official requests out there.  You will not get what you want initially.  They may not have the note period.

While going to the county recorder is fun, get certified copies of anything you get so you do not have to go back.  But they will not render any type of opinion.  Just the facts ma'am.

I would find out who wrote title insurance on the subject property and have them do a full title search on the very issues you are seeking.  See what they can or cannot do.  Talk to different title companies.  You may be surprised.  There is always some old timer good ol' boy title company in town that will do something that the big boys won't.  You need something more than running preliminary title and you need it from an insurer as a "neutral" opinion.  Run it twice in two different places if there is a question a la MERS.

For fun, approach your bank/servicer for permission for a short sale.  Ask for official payoffs.  Get them thinking that they are going to get another windfall of cash quickly if they just throw something at you to go away.  The left hand does not know what the right does.  In my suit with Wells Fargo, I simultaneously had 3 WF units taking opposing actions while the legal department was in court.  Funny.  The roof is on fire.  Poor some gasoline on it.  At this juncture, use a large bureaucracy's inconsistency against itself.  Always be nice to the people on the phone, even if you are having a bad day.

If anything goes to court in the future, understand that your attorney will never know your case better than you.  You are the only custodian of the facts and lawyers are lazy readers that never parse the accounting.

If there is a question on title or note and you are going into default - file something and then file a "lis pendens" with the recorder. It may screw up any sale you want, but if you are down the road on your home at least record notice of your suit.  That way you can go after the buyer at foreclosure as well as the bank if you have been damaged.

Mon, 10/18/2010 - 12:10 | 658439 PlausibleDenial
PlausibleDenial's picture

Also, when asking for proof of ownership, be sure to ask for "My original wet ink signature promissory note".  If the deed of trust says MERS as the nominee, you will not get a copy of your origianl wet ink note.

Mon, 10/18/2010 - 10:31 | 658109 pazmaker
pazmaker's picture

JPM has my mortgage and I will stop paying it with the November payment. I will escrow the payments myself and wait and see what happens.  I'm sending them a letter wanting to see the note, but I doubt they will respond.  I have a USDA rural development loan that went through a broker and I guess was sold to to JPM.  I believe it would be Ginnie Mae.. are they caught up in this fiasco also?

Mon, 10/18/2010 - 10:46 | 658148 beastie
beastie's picture

You might want to send to your loan service provider to cover your ass and get a lawyer to double up on your ass covering.

I am doing the same thing.

 

 

Mon, 10/18/2010 - 11:22 | 658275 Ned Zeppelin
Ned Zeppelin's picture

Be very careful with this - you are messing with some powerful forces. I would not stop paying and say "prove it!" At the very least, the banks probably enjoy a presumption that the transactions are in order until you prove otherwise.  My advice is to pay, but investigate.

A Real Estate Attorney

Mon, 10/18/2010 - 13:46 | 658679 MachoMan
MachoMan's picture

These methods are to be used as a shield, not a sword...  you are going to find yourself on the shit end of a stick, without available remedy in state court, without sympathy, and with no damages.

Another Real Estate Attorney.

Mon, 10/18/2010 - 10:59 | 658185 sethco
sethco's picture

It's going to take grassroots actions like that to bring down TBTF financial black holes. They assume that the millions of people actively involved in this will behave as they always have, i.e. keep sending them money month after month.

Mon, 10/18/2010 - 11:13 | 658234 PlausibleDenial
PlausibleDenial's picture

See above.

Mon, 10/18/2010 - 10:33 | 658115 csmith
csmith's picture

Once again I'll ask how is it the Fed can justify holding $1 trillion or $2 trillion in MBS at face value when their equity line is only $50 billion or so? Even a 5% mark on this "portfolio" wipes out their equity. 

OH, I see; the loans are guaranteed by Fannie & Freddie! We have a nice circular flow here; the Fed buys the loans at par, which are then paid off at par by the GSEs, which get more cash from the Fed to fund the 95% of the mortgage market which they control today...Uncle Bernie would be proud!

Mon, 10/18/2010 - 11:18 | 658254 PlausibleDenial
PlausibleDenial's picture

This just happened to a friend of mine.  Beach condo gets foreclosed by the servicer (EverHome).  Everhome has no "standing" as there is no recorded instrument located at the court house.  In fact, not a mention of Everhome.  Condo gets auctioned on Oct 1.  Highest (and only) bidder is Everhome.  After the 10 day waiting period Everhome buys the condo and concurrently sells to Fannie Mae.  Yes, Fannie Mae now owns the condo.  So, in my small tiny brain analysis, it seems that Everhome just got a stream of income for free then gets taken out by the taxpayer aka Fannie.  Does anyone have any thoughts on this action?

Mon, 10/18/2010 - 12:20 | 658457 bankonzhongguo
bankonzhongguo's picture

This is a little far fetched, but we live in interesting times. 

I ran into a bunch of California condo properties that were underwritten for Fannie Mae guarantees.  However, condos are a little bit of a different animal in that they have Homes Association dues in order to maintain the property, etc.  In order for banks to obtain Fannie guarantees, the loan must be "conforming" to certain conditions set by Fannie.  For condos the Homes Association must have a certain ratios of money in reserve accounts to ensure that the subject condo is well maintained going forward - meaning the condo asset is protected by local management and not just the borrower.  Well, condo developments need to be on an approved list at Fannie meaning that have enough money and quality management to mitigate risk, but the banks are self-reporting to Fannie.  If the bank writes a loan on a non-qualified Fannie condo - well its not covered by Fannie.  The short of it is some condos were underwritten for Fannie, but did not qualify for Fannie.  More fraud.  But now the property is being sold back to Fannie for the deficiency.  That may be fraud by the bank back to Fannie Mae.  Find three examples of this activity and you have a decent class action suit on behalf of the American taxpayer. 

Mon, 10/18/2010 - 12:41 | 658522 PlausibleDenial
PlausibleDenial's picture

Thanks tons.... Do you have a link to Fannie's approved list of condo's? 

Mon, 10/18/2010 - 14:29 | 658846 bankonzhongguo
bankonzhongguo's picture

Here is some junk I found to start.

Its a little more complicated however. Different types of loans have different underwriting requirements. You have to know something about when the mortgage was originated as a FNMA qualifying.  It may be the association was good to go in 2002, but now in 2010 its not approved. Looking at the "approved list" today is not 100%.   Often simply finding someone that sits on the local homes assoc board has all the historical facts and figures.  The old timers will know if and when the project was in or out for Fannie.  Its quite common for condos not to qualify, but the loan is made anyway.  It is not common for the bank to charge back to Fannie a deficiency en mass.

 

https://www.efanniemae.com/sf/refmaterials/approvedprojects/

Mon, 10/18/2010 - 10:37 | 658122 the rookie cynic
the rookie cynic's picture

The banks and their cronies in Congress will stall until the majority of the toxic MBS's are off loaded on to the Fed's balance sheets. So, in effect, Bernanke is sacrificing the dollar, driving out good money and good businesses in favor of bad, exporting inflation around the globe, risking a hyperinflationary collapse of the world's reserve currency, instigating a global trade war and possibly WW3 -- all to save the TBTF banks.

Now that's a hell of a game plan.

http://therookiecynic.wordpress.com/2010/10/18/the-worlds-fastest-way-to...

Mon, 10/18/2010 - 10:38 | 658124 assumptionblindness
assumptionblindness's picture

Does anyone know if Reggie Middleton has been on the air yet with Erin and Mark this morning? 

Mon, 10/18/2010 - 10:53 | 658169 Trifecta Man
Trifecta Man's picture

He is on now - as of 7:53 PDT

Mon, 10/18/2010 - 11:01 | 658193 assumptionblindness
assumptionblindness's picture

I just saw it.  Thanks.

Mon, 10/18/2010 - 10:41 | 658131 treemagnet
treemagnet's picture

Sanctity of contracts....I remember reading this somewhere.....hmmmm, where was that again?

Mon, 10/18/2010 - 10:42 | 658135 Tsunami Effect
Tsunami Effect's picture

"will be spread out over years owing to the complexity and cost of implementing putbacks, especially in non-agency securitizations. Consequently, the annual putback cost to the industry is likely to be in the range of $10-25 billion."

This makes sense in normal market conditions.  But given the administrations track record (GM bondholders and BP $25B damage pool) I doubt this will end well for the Banks!  And the pain will be accellerated. 

Add Bill Gross buying MBS and voila!  The QE2 set's sail to buy not only Treasuries, but MBS on bank balance sheets.

 

Mon, 10/18/2010 - 10:45 | 658145 snowball777
snowball777's picture

From $115B to $55B?!

Pull the other one, Dimebag Dimon!

Mon, 10/18/2010 - 10:47 | 658150 Zerohedge fan
Zerohedge fan's picture

My name in PIMP and I work for PIMPco.

Prostitution, paedophilia, young boys; that's my job one.

 

"I do not know what you heart about me?"

 

http://www.youtube.com/watch?v=UDApZhXTpH8

 

Mon, 10/18/2010 - 10:49 | 658160 dan10400
dan10400's picture

$55B?   Sounds like a paper cut! (pun not necessarily intended, but appropriate).

Mon, 10/18/2010 - 11:02 | 658196 williambanzai7
williambanzai7's picture

Somewhere I have a file of Chase subprime product promotional materials that were targeting mortgage brokers. 

These people have not a clue about what is involved in cleaning this shit hole they created up!

Mon, 10/18/2010 - 11:17 | 658248 Careless Whisper
Careless Whisper's picture

According to the Chase paper, a mortgage Note can be assigned "in blank". A-okay with them and the Association of Securities something. All of a sudden a mortgage Note became a bearer Note. Now these Notes are floating in a parallel universe independent of the local county clerk's office where Mortgage/Note Assignments are supposed to be recorded. I guess there are two sides to every legal position but Chase seems to have mobilized lawyers and organizations in order to prop up a losing position on "procedures".

 

Mon, 10/18/2010 - 11:47 | 658376 williambanzai7
williambanzai7's picture

Exactly!

Mon, 10/18/2010 - 11:37 | 658335 kaiserhoff
kaiserhoff's picture

They are throwing the hail marys.  Haven't researched it, but bearer bonds were prohibited many years ago under pressure from the IRS.  Hard to track interest income...  Still, yet, again, they had better be careful what they ask for.

Mon, 10/18/2010 - 11:43 | 658360 Husk-Erzulie
Husk-Erzulie's picture

MERS study material courtesy of Social Science Research Network via Firedogs.

http://static1.firedoglake.com/37/files/2010/10/SSRN-id1469749.pdf

http://static1.firedoglake.com/37/files/2010/10/SSRN-id1684729.pdf

Looks like solid background for those wishing to splash about in this shite... :-)

Mon, 10/18/2010 - 12:25 | 658474 tallystick
tallystick's picture

And then there are  also these  l33t video  tutorials on  MERS  own website.

 

http://www.mersinc.org/downloads/index.aspx?id=13

Mon, 10/18/2010 - 11:46 | 658373 Husk-Erzulie
Husk-Erzulie's picture

I presume this will be of interest to some as well...

http://action.seiu.org/page/speakout/wheresthenote

Mon, 10/18/2010 - 12:16 | 658451 belogical
belogical's picture

There is paying back those who bought CDO and then there's the criminal aspect of defrauding people of their rights, or taking closing fees and not really doing the work. If DC stays out of this the banks are toast.

 

Mon, 10/18/2010 - 14:53 | 658917 Jean
Jean's picture

What are the tax implications of these screw-ups?  If my mortgage has vanished, did I just incur a massive capital gain.  I'm surprised I haven't seen lawyer ads for a fixed price, "show me my note," demand letters. 

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cycjyf's picture

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