Posts Tagged ‘Bank of America class action lawsuit’

Bank of America to pay $11.6 billion settlement to Fannie Mae

Bank of America

Newscast Media CHARLOTTE, N.C—Bank of America Corp has announced a settlement deal with Fannie Mae of $11.6 billion for bad mortgages of nearly a decade’s worth of home loans, as a result of Bank of America’s acquisition of Countrywide Financial Corp. five years ago.

The agreement is also separate from an $8.5 billion foreclosure-abuse settlement between regulators and 10 banks, including Bank of America, additionally announced Monday. That pact is in addition to another settlement reached last February, where five large banks, including Bank of America, agreed to a $25 billion settlement with the Obama administration and 49 state attorneys general.

Under the deal announced Monday, the bank will pay $3.6 billion to Fannie Mae and buy back $6.75 billion in loans that the North Carolina-based bank and its Countrywide banking unit sold to the government agency from Jan. 1, 2000 through Dec. 31, 2008, according to the Washington Post.

In layman’s terms here’s what happened:

(i) Mortgages that were generated over the last decade were bundled together into Mortgage-Backed Securities, and placed into a pool.

(ii) The pools are then placed into a trust called a Real Estate Mortgage Investment Conduit Trust (REMIC) and a Trustee is appointed to oversee the trust.

(iii) The trustee then hires a servicer whose duty is to collect money on behalf of the REMIC trust, and the servicer is paid a small fee for collecting these monies from homeowners.

(iv) Meanwhile, the Mortgage-Backed Securities are sold on the secondary market as derivatives, which are insured with Credit Default Swaps in case the trust goes under.

(v) The mortgage changes hands as it is bought and sold multiple times on the secondary market throughout the world, making it virtually impossible to identify who owns the loan, due to the use of MERS (Mortgage Electronic Registration Systems) on the deed of trust. The lack of transparency of MERS prevents anyone from knowing the true and actual owner of the mortgage.

*It is the reason why when you send a “Qualified Written Request” to a servicer asking for the trust documents and the real owner of the loan, in 100 percent of the cases, the servicers cannot provide such information because the loan changed hands multiple times when bought and sold as a Mortgage Backed Security. This practice has clouded the titles of securitized mortgages from 2003-2010.

What went wrong

(vi) The problem with Bank of America and other banks that were sued is that all these mortgages were fraudulent, because the Notes were not transferred into the REMIC trusts. The trusts were empty!

(vii) To prevent the financial collapse, the banks declared the mortgages “toxic assets” and requested bailout money from the government under the Toxic Asset Relief Program (TARP), to halt a financial collapse. $16 trillion was extended.

According to an audit of the Federal Reserve by GAO (Government Accountability Office) below is some of the money the banks received:

Citigroup: $2.5 trillion ($2,500,000,000,000)

Morgan Stanley: $2.04 trillion ($2,040,000,000,000)

Merrill Lynch: $1.949 trillion ($1,949,000,000,000)

Bank of America: $1.344 trillion ($1,344,000,000,000)

Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)

Bear Sterns: $853 billion ($853,000,000,000)

Goldman Sachs: $814 billion ($814,000,000,000)

Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)

JP Morgan Chase: $391 billion ($391,000,000,000)

Deutsche Bank (Germany): $354 billion ($354,000,000,000)

UBS (Switzerland): $287 billion ($287,000,000,000)

Credit Suisse (Switzerland): $262 billion ($262,000,000,000)

Lehman Brothers: $183 billion ($183,000,000,000)

Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)

BNP Paribas (France): $175 billion ($175,000,000,000)

Click here to read or download the GAO audit of the $16 trillion.

(viii) The banks receive trillions of dollars, and instead of correcting the defects, they sit on the money, and use some of it to buy up smaller failing banks.

(ix) Investors find out that the Mortgage-Backed Securities weren’t in fact mortgage-backed—they were useless pieces of paper. Lawsuits are filed. Banks settle.

(x) Government teams up with homeowners and whistleblowers reaching a multi-billion dollar settlement with the banks for foreclosure abuse.

The latest settlement between Bank of America and Fannie Mae falls within the sequence of events just described above.


Be the first to comment - What do you think?  Posted by Joseph Earnest - January 7, 2013 at 6:51 pm

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Mortgage fraud suit brought by NY Attorney General against MERS, BofA, Chase and Wells Fargo

Mortgage fraud

Newscast Media NEW YORK — Some of the nation’s largest banks were sued on Friday by New York’s Democratic Attorney General, Eric Schneiderman, for deceit and fraud in using an electronic mortgage registry that he said puts homeowners at a disadvantage in foreclosures. The biggest culprit in this fraudulent scheme is Mortgage Electronic Registration System Inc. or MERS, that uses an electronic
registry to track mortgages without having to pay local county fees for registering Deeds of Trust when ownership changes hands.

Schneiderman said on, “The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages. Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people, with little regard for basic legal requirements or the rule of law.”

Member banks like Bank of America, JP Morgan Chase, and Wells Fargo, who actually do not own these mortgages, but are only Servicers of securitized debt obligations, can then claim the right to foreclose on a property without disclosing the actual identity of the owner of the Deed or the Note, since the majority of mortgages issued between 2001-2008 were securitized and sold on the secondary market as derivatives. Schneiderman refused to negotiate a deal that lets banks off the hook after paying a soon-to-be-reached settlement, in which banks are expected to pay roughly $25 billion for fraudclosure. Instead, the New York Attorney General is fighting for homeowners in his state and holding these banks accountable.

MERS is owned by the company, MERSCORP, which in turn is owned by a group of Wall Street investment bankers. MERS is unregistered and unlicensed to conduct mortgage lending or any other type of business in any state and has been knowingly and intentionally, illegally and fraudulently recording mortgages and conducting business in the U.S. on a large scale and systematic fashion.

MERS often splits the Note from the Deed in violation of Carpenter v. Longan, creating an unsecured debt obligation, because one entity holds the Note, while MERS holds the Deed of Trust even though MERS is not a creditor nor does its name appear on the Notes secured by such Deeds. When the Note is bifurcated from the Deed, it means the lien was never perfected, therefore neither the holder of the Note nor the holder of the Deed can foreclose on a homeowner. The reason is: A person holding only the Note lacks the power to enforce it, and a person holding only a Deed of Trust suffers no default because only the holder of the debt obligation is entitled to payment on it.

By suing for “fraud and deceit” the New York Attorney General has put MERS and the bankers in a very difficult place because by law the Supreme Court has ruled that: “Fraud vitiates everything” (Boyce’s Executors v. Grundy); also “Fraud vitiates the most solemn contracts, documents and even judgments,” (in United States v. Throckmorton). This means that all the contracts that have MERS on them become nullified by law, if there was fraud involved as the NY Attorney General alleges in his lawsuit. Any previous judgments against homeowners who were also victims of the fraudulent scheme by MERS and the banks are also nullified and void by law, as stated below:

37 Am Jur 2d at section 8 states: “Fraud vitiates every transaction and all contracts. Indeed, the principle is often stated, in broad and sweeping language, that fraud destroys the validity of everything into which it enters, and that it vitiates the most solemn Contracts, Documents, and even Judgments.”

If a document, contract or judgment is deemed fraudulent and void, no court in America is bound to honor such a judgment or contract, hence it releases the one who was defrauded from any further obligation, because the law permits the judge to declare such contracts and judgments from previous courts void. See below:

“A void act cannot be legally consistent with a valid one. An unconstitutional law cannot operate to supersede any existing valid law. Indeed, insofar as a statute runs counter to the fundamental law of the land, it is superseded thereby. NO ONE is bound to obey an unconstitutional law, and NO COURTS are bound to enforce it. (Sixteenth American Jurisprudence Second Edition, 1998 version, Section 203 (formerly Section 256)).


Joseph Earnest is not an attorney and does not offer legal advice. The information in this article is a result of his extensive two-year research and investigation, and is not meant as a substitute for seeking legal advice from an attorney.


Be the first to comment - What do you think?  Posted by Joseph Earnest - February 3, 2012 at 10:09 pm

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Bank of America, Wells Fargo, Citi, Chase, GMAC and MERS Sued by Attorney General

Bank of America, CITI, GMAC, Wells Fargo and Chase sued

Newscast Media BOSTON — Five national banks have been sued in connection with their roles in allegedly pursuing illegal foreclosures on properties in Massachusetts as well as deceptive loan servicing, Attorney General Martha Coakley announced today. The lawsuit was filed today in Suffolk Superior Court against Bank of America, Wells Fargo, JP Morgan Chase, Citi, and GMAC. It also names Mortgage Electronic Registration System, Inc. (“MERS”) and its parent, MERSCORP Inc., as defendants.

“The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis,” said AG Coakley. “Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law. Our action today seeks real
accountability for the banks illegal behavior and real relief for homeowners.”

In the complaint, the Attorney General alleges these five entities engaged in unfair and deceptive trade practices in violation of Massachusetts’ law by:

* Pervasive use of fraudulent documentation in the foreclosure process, including
so-called “robo-signing”;

* Foreclosing without holding the actual mortgage (“Ibanez” violations);

* Corrupting Massachusetts’ land recording system through the use of MERS;

* Failing to uphold loan modification promises to Massachusetts homeowners.


According to the complaint, the banks used false documentation in the foreclosure process, including so-called “robo-signing”, whereby bank personnel signed affidavits that were untrue, or not based on the signor’s actual knowledge.


Second, these five entities participated in unlawful foreclosures when they commenced foreclosures on mortgages where they were not the holders of those mortgages. The Supreme Judicial Court (SJC), in Commonwealth v Ibanez, recently upheld Massachusetts law and stated that “only the present holder of a mortgage is authorized to foreclose on the mortgaged property.” Banks “lack standing” to foreclose if they do not own the debt obligation.


Third, the complaint alleges that these banks have undermined our public land record system through the use of MERS, a private electronic registry system. According to the complaint, the creation and use of MERS was adopted by these defendants primarily to avoid land registration and recording requirements, including payment of recording and registration fees, and to facilitate sales of mortgage loans.


Finally, the complaint alleges the banks deceived and misrepresented to borrowers the process, requirements, and availability of loan modifications. The complaint alleges these banks misled borrowers about their eligibility for this program and the amount of relief available, failed to achieve a significant level of modifications, and often strung along borrowers for months in trial modifications that were ultimately rejected.

AG Coakley’s office has been a national leader in holding banks and investment giants accountable for their roles in the economic crisis. AG Coakley has obtained recoveries from Morgan Stanley, Goldman Sachs, Royal Bank of Scotland, Countrywide, Fremont Investment & Loan, Option One, and others on behalf of Massachusetts homeowners. As a result of these actions, her office has recovered more than $600 million in relief for investors and borrowers, helped keep more than 25,400 people in their homes, and returned nearly $60 million in taxpayer funds back to the Commonwealth.

Unfortunately stories like these are killed by the mainstream media, that are forbidden to report them, since they are owned by the large corporations that finance them. The entire complaint can be read here.


Be the first to comment - What do you think?  Posted by Joseph Earnest - December 2, 2011 at 3:13 am

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Fake mortgage-backed securities prompt AIG to sue Bank of America

AIG sues Bank of America

Newscast Media NEW YORK, New York –Bank of America’s problems continue to grow ever since the financial giant purchased Countrywide and its assets. On June 29, BofA settled an $8.5 billion lawsuit with investors for selling them mortgage-backed securities that were never mortgage-backed. The Attorneys General for all 50 states opened investigations with the bank, and inside sources speaking on condition of anonymity say a settlement in the neighborhood of $25billion by Bank of America will soon be reached, in exchange for immunity from prosecution by individual states.

Bank of America also faces several class action lawsuits, and now has to deal with the most recent lawsuit by insurer AIG seeking to recover more than $10billion in losses from Bank of America on $28 billion of investments, in what could be the largest mortgage-security-related action filed by a single investor, the report said. The AIG lawsuit is American International Group Inc et al v. Bank of America Corp et al, New York State Supreme Court, New York County No. 652199/2011.

Here’s how it works:

The homeowner expects to be a “Borrower” receiving a “Loan” from the bank. The bank then sells the loan to a Special Purpose Vehicle (a shell company) and gets paid in full without recourse, and also gets a commission as a finder’s fee, but the bank never funded the loan. The homeowner was tricked into believing the bank funded the loan, when the bank was just paid for finding a homeowner willing to sell the debt obligation. The bank’s commission was also for the bank to allow its name to be on the instrument, and often to act as Servicer to get monthly fees.

The homeowner was never told truth about who funded the transaction, because a Deed of Trust would not normally be allowed for a Financial Asset purchased by a Securitization Trust (a Security covered by security laws), or a Commercial Paper which is covered by the Uniform Commercial Code Division (UCC) 8, whereas Securitized Transactions with a Deed of Trust are covered under UCC 9.

The “Lender” named on the instrument did not fund the transaction, and therefore was not really the “Lender” at all. They acted only as a “Nominal Lender”, named on the debt instrument only to facilitate the creation of a Deed of Trust or Mortgage to secure the debt obligation as an alleged “Loan”, when it was not a “Loan”, but rather the receptacle for an Asset-Backed Investment Security. The “Pretender Lender” was paid in full, plus a commission, and lost interest in the debt obligation.

Also, the Deed of Trust or Mortgage can’t secure an Asset-Backed Investment Security, and homeowners were tricked into thinking they were “Borrowers” of “Loans”,when they were actually SELLERS of a debt instrument to a Securitization Special Purpose Vehicle. An invalid Deed of Trust or Mortgage, was fraudulently procured under the guise of a “Loan”, when it wasn’t a Loan, but rather the “Purchase of a Note” into an Asset-Backed Investment Security.

The investor on the other hand, who put up the money was never told that the mortgage-backed security was never mortgage backed because the majority of them do not make it into the trust, as they are resold over and over again. The pretender-lender holds on to the Note and in most cases never delivers it into the
trust as admitted by Countrywide representative in Kemp v. Countrywide, Case No. 08-18700-JHW.

None of this is revealed to the homeowner or investors at closing, hence the fraud lawsuits that are being filed. Insurers like AIG were taken for a ride, because most of these mortgage-backed securities that they insured never became assets of the trusts. The trusts were either empty or had bad mortgages.

The Pooling and Servicing Agreement, the document that governs the trust Section 2.01(a) states:

(a)“Each Seller concurrently with the execution and delivery hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the Depositor, without recourse, all its respective right, title and interest in and to the related Mortgage Loans…”

The Depositor then assigns the mortgage to the Trustee who deposits it into the trust for the benefit of the Certificateholders. If the mortgage is either a non-qualified mortgage delivered into a trust, or is simply not delivered into the trust, these defects can never be cured because when a mortgage is securitized the act is irreversible. You cannot unscramble the eggs.


2 comments - What do you think?  Posted by Joseph Earnest - August 8, 2011 at 10:10 pm

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Bank of America targeted in new probe by New York Attorney General

Bank of America under fire

Newscast Media NEW YORK, New York — In an effort to to get to the the bottom of the questionable foreclosure practices in the mortgage industry, New York Attorney General Eric Schneiderman has targeted Bank of America, the biggest U.S. bank by assets, in a new probe that questions the validity of potentially thousands of mortgage securities and their associated foreclosures, two people familiar with the matter said.

Huffington Post reported that Court testimony and independent studies have raised questions over whether banks and other financial firms passed along the required documents to trusts, the independent entities that oversee securities for investors. In some cases where trusts moved to seize borrowers’ homes, judges have determined the trusts lacked legal standing due to faulty documentation. If the legal steps that guide securitization — like taking mortgage documents from one party to another, a critical step under New York law — were not undertaken, then the investors who bought the bundled loans could force the companies to buy them back, compelling them to eat enormous losses.

New York state investigators could also find that those securities aren’t valid financial instruments at all and take action under state law. Huffington Post did not explain what critical steps needed to be undertaken so I’ll attempt to explain the relevant steps below:

New York State Law:

Nearly all the agreements that govern securtized mortgages (Pooling and Servicing Agreements) are governed by the laws of New York state. The agreement has a section specifically stipulates that the trust agreement “shall be governed by and controlled in accordance with the laws of the State of New York…”

When these securitized loans are passed around and sold to different entities, every transaction has to be recorded in the appropriate County Clerk’s office in the county where the property is located. The note also has to be endorsed without recourse from the seller the buyer.

In the securtization process there is the Originator (bank); Sponsor (a shell company) the Seller (another shell company); Master Servicer; Depositor and then the Trustee. The note should be endorsed from Originator to Sponsor to Seller to Master Servicer then to Depositor sequentially, who finally endorses it to the Trustee. In other words a note that is an asset of the trust should have an “unbroken”chain of endorsements from the Sponsor to the Trustee sequentially.

Article II Section 2.01 of every PSA says: Section 2.01 (c)(i)(A) requires that the Depositor deliver the original Mortgage Note endorsed by manual or facsimile signature in blank in the following form:

“Pay to the order of ____________ without recourse,” with All intervening endorsements showing a Complete chain of endorsement from the Originator to the Person endorsing the Mortgage Note (each such endorsement being sufficient to transfer all right, title and interest of the party so endorsing,
as noteholder or assignee thereof, in and to that Mortgage Note…)

Under New York Trust law:

A. Unless an asset is transferred into a lifetime trust, the asset does not become Trust property. (NY Estates, Powers and Trust Law, Section 7-1.18)

B. The assignment of a mortgage without transfer of the underlying promissory note is a nullity. (Merritt v. Bartholick, 36 N.Y 44 (1867); Kluge v. Fugazy, 145 A.D. 2d 537 (1988)).

C. A Trustee’s act that is contrary to the trust agreement is VOID. (New York Estates, Powers and Trusts Law, Section 7-2.4)

In other words the act of a Trustee receiving an instrument that doesn’t have ALL the intervening endorsements showing an “unbroken” chain of endorsements is void. Also the act of a Trustee receiving an instrument where the actors that purchased and sold it are not recorded in Register of Deeds office is void.

Banks have constantly failed to provide notes that have all endorsements and have thus failed to prove standing. Most people do not understand what standing to foreclose means, but under Article III of the United States Constitution, to meet the standing burden, a bank should prove the following:

(i) Injury in fact, (ii) Causation and (iii) Redressability. To have LEGAL standing a party must assert “its own” legal interests as the real party in interest. If a bank cannot prove that the loan became an asset of the Trust, it can never be able to prove standing.

The same Section 2.01(B) stipulates: “As promptly as practicable subsequent to such transfer and assignment, and in any event, within one-hundred and twenty (120) days after such transfer and assignment, the Trustee shall (B) cause such assignment to bein proper form for recording in the appropriate public office for real property records and (C) cause to be delivered for recording in the appropriate public office for real property records the assignments of the Mortgages to the Trustee…”

Broken Chain of Assignments:

So even if the note has the endorsements but the entities that purchased the Note were never recorded at the time of foreclosure, in County Clerk’s office where the property is located, the bank once again cannot meet the standing burden, because an unrecorded assignment creates a broken chain in title, and if you do not know who owns the title, you do not know whom to pay, hence the instrument becomes void.

A Broken Chain of Assignments renders the “Deed of Trust” Void and Unenforceable under UCC 3-201, 3-204 & 3-302 and as such no triggering of the foreclosure clause in the “Deed of Trust” is possible. With regard to real property, before an entity assigned an interest in that property would be entitled to lay claim on the property, their interest therein must have been recorded in accordance to State property laws.

Now this new investigation into whether the securities these companies created are even valid, represents a new front in Schneiderman’s ongoing probe, and raises fresh questions into the potential liability sellers of these mortgage instruments face.



4 comments - What do you think?  Posted by Joseph Earnest - June 15, 2011 at 12:23 am

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Bank of America agrees to compensate Freddie Mac and Fannie Mae

Bank of America

Newscast Media HOUSTON, Texas –In an agreement that is likely to be repeated across the banking industry in the US, embattled financial institute Bank of America, has paid more than $2.5bn to settle a dispute over claims that it sold faulty mortgages to government-backed lenders. Bank of America said it paid $1.28bn to Freddie Mac and $1.34bn to Fannie Mae to resolve claims its Countrywide division sold products to the two giant mortgage lenders – whose loans are guaranteed by the US government – that may not have met underwriting standards.

Bank of America and its rivals have faced pressure from Freddie and Fannie and also private investors to either buy back mortgages or provide compensation for those loans that soured dramatically once US house prices started falling in late 2006. Most of the claims against Bank of America stem from mortgages sold by Countrywide Financial, a lender that Bank of America bought in a fire sale in summer 2008.

Brian Moynihan, Bank of America’s chief executive, said yesterday that the agreements “resolve substantial legacy issues in the best interest of our shareholders”. Shares in the bank, which is based in Charlotte, North Carolina, climbed almost 5pc to $13.83 in early trading on Wall Street.

The bank said that the settlement, which covers more than $127bn of mortgages sold by Countrywide, resolves all claims made by Freddie and Fannie. However, Bank of America still faces billions of dollars in claims from private investors who allege they were sold faulty mortgages. Mr Moynihan said in October the bank would fight those investors whose attitude was “I bought a Chevy Vega but I want it to be a Mercedes”.


1 comment - What do you think?  Posted by Joseph Earnest - January 3, 2011 at 8:03 pm

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