Posts Tagged ‘foreclosure fraud’

SEC and DOJ charge Bank of America with mortgage and securities fraud

The so-called too big to fail banks

Newscast Media CHARLOTTE, N.C—If Bank of America goes down, the rest (CITI,
Wells Fargo, Chase, Deutsche Bank etc…) will follow. This is huge! The SEC usually
charges the little guys like lawyers, but now they have stepped up and are going
after the “too big to fails” as is demonstrated in this epic Bank of America lawsuit.

The Securities and Exchange Commission has charged Bank of America and two
subsidiaries with defrauding investors in offering of residential mortgage-backed
securities (RMBS) by failing to disclose key risks and misrepresenting facts about the
underlying mortgages. CONTINUE TO FULL STORY>>


Be the first to comment - What do you think?  Posted by Joseph Earnest - August 7, 2013 at 10:01 pm

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SEC charges trustees for inaccurate disclosure of investments

Securities and Exchange Commission

Newscast Media WASHINGTON—The Securities and Exchange Commission has charged the gatekeepers of a pair of mutual fund trusts with causing untrue or misleading disclosures about the factors they considered when approving or renewing investment advisory contracts on behalf of shareholders.

The five trustees named in the SEC enforcement action are: Michael Miola of Arizona, Lester M. Bryan of Utah, Anthony J. Hertl of Florida, Gary W. Lanzen of Nevada, and Mark H. Taylor of Ohio.

Some trusts are created as turnkey mutual fund operations that launch numerous funds to be managed by different unaffiliated advisers and overseen by a single board of trustees. The federal securities laws require all mutual fund directors to evaluate and approve a fund’s contract with its investment adviser, and the funds must report back to shareholders about the material factors considered by the directors in making these decisions. The SEC Enforcement Division’s Asset Management Unit has been fee arrangements in the fund industry.

An SEC investigation that arose from an examination of the Northern Lights Fund Trust and the Northern Lights Variable Trust found that some of the trusts’ shareholder reports either misrepresented material information considered by the trustees or omitted material information about how they evaluated certain factors in reaching their decisions on behalf of the funds and their shareholders. The trustees and the trusts’ chief compliance officer Northern Lights Compliance Services (NLCS) were responsible for causing violations of the SEC’s compliance rule, and the trusts’ fund administrator Gemini Fund Services (GFS) caused violations of the Investment Company Act recordkeeping and reporting provisions.

The firms and the trustees have agreed to settle the SEC’s charges.

“Determining the terms of the investment advisory contract, especially compensation of the adviser, is one of the most critical duties of a mutual fund board,” said George S. Canellos, Co-Director of the SEC’s Division of Enforcement. “We will aggressively enforce investors’ rights to accurate and complete information about the board’s process and decision-making.”


Be the first to comment - What do you think?  Posted by Joseph Earnest - May 6, 2013 at 4:53 pm

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SEC charges lawyer with issuing fraudulent opinion letters

Inside court room

Newscast Media WASHINGTON— The Securities and Exchange Commission today charged a California-based lawyer who has been fraudulently churning out baseless legal opinion letters for penny stocks through his website without researching and evaluating the individual stock offerings.

Legal opinion letters are issued to transfer agents on behalf of holders of restricted stock seeking to sell the stock freely in the public markets. Transfer agents typically require a lawyer’s opinion explaining the legal basis for lifting the restriction on the stock and allowing it to be freely traded.

The SEC alleges that Brian Reiss of Huntington Beach, Calif., set up to promote his legal opinion letter business and advertise “volume discount” rates while noting “penny stocks not a problem.” Reiss steered potential customers to his website by making bids on search terms through Google’s AdWords, and then relied on a computer-generated template to draft his opinion letters within minutes absent any true analysis of the facts behind each stock offering. The letters from Reiss ultimately made false and misleading statements and facilitated the sale of securities in violation of the registration provisions of the federal securities laws.

“Reiss flouted his responsibilities as a gatekeeper in the issuance of stock, and churned out opinion letters to make a quick buck,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “Attorneys who act as gatekeepers in our markets have a solemn responsibility to ensure that they provide accurate information to the marketplace.”

Click here or download to read entire SEC complaint >>

The SEC acknowledges the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority (FINRA).

Be the first to comment - What do you think?  Posted by Joseph Earnest - March 7, 2013 at 10:52 pm

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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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Part III-Why Obama and agencies like the SEC settle cases


Newscast Media HOUSTON, Texas—Before I conclude this series, I would like to explain what a forensic audit is. A true forensic audit on any property will tell you if the underlying debt obligation was securitized and who the “holder in due course” or holder of the debt obligation is. If a property was purchased in cash, a forensic audit can still be done, because banks are known to seize properties that were paid in cash due to a broken chain of assignments, that led to a broken chain of title. It is important therefore even with a paid off property to make sure you have what is referred to as a clear title. Read this story about how a court authorized the house sale of a man in Florida who had paid cash and had no mortgage.

A clear title has no encumbrance on it, because prior to the sale of the property, the lien was perfected, or there were absolutely no clouds on the title. A perfected lien is one where the person who holds the deed of trust, also holds the note. If by any chance the person who holds or held the deed of trust is or was different from the one who holds or held the note, then you have a defect in title that can never be cured, because both instruments traveled on divergent paths. Even if you paid cash for it, someone five or ten years down the road who knows about the Law of Mortgages and trust law, can come back and sue for a “fraudulent conveyance.” For now, I will just stick to the topic of the Department of Justice and the SEC, including what I discovered during a forensic audit on some property.

After my investigative research was complete, I demonstrated using charts, that several SEC violations happened and trust laws were broken, and that the true owner of the securitized debt obligation was the Depository Trust Company the nominee of whom is CEDE & Company. The judge got scared and immediately sealed the case. In the end the bank walked away from the property out of fear of being charged with fraud by the SEC under Section 17(a)(2) of the Securities Act of 1933 that states:
“It shall be unlawful for any person in the offer or sale of any securities or security-based swap agreement to obtain money or property by means of any untrue statement of a material fact.”

The untrue statements in this case were the ones the bank’s attorneys uttered in the court record, claiming the bank owned the debt obligation, and using those statements to unlawfully obtain a piece a property, and legal fees (money) as a result of representing the banks.

Also 17 C.F.R section 240.10b-5 states: “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

Because the Justice Department and the Securities and Exchange Commission know that military agents ultimately have the last word in these cases, and because such cases are very sophisticated even for experienced judges, who last went to school in the 70s or 80s before the creation of the Collateralized Debt Obligations in form of mortgage-backed securities, the SEC and DOJ are laying out the fraud and violations before these multi-national corporations, and are succeeding in settling out of court.

You probably are thinking how these military Judge Advocate Generals can control the outcome of a case if it is a trial by jury. Before a case goes to trial, the judge will determine whether it is frivolous, whether you have standing, whether there is enough evidence, and if he or she dismisses it, and it never goes to trial, hasn’t the judge controlled the outcome? We see criminal charges being dropped everyday because there was a mishandling in the chain of evidence or a witness disappeared, and such criminal cases remain unsolved and untried. We also see civil cases being dismissed for failure to state a claim under which relief may be granted, or lack of subject matter or jurisdiction. Isn’t the judge controlling the outcome?

Even when it does finally go to trial, we always hear about “mistrials” happening because of a “procedural” defect, technicality or one side files a “voluntary withdrawal” because the evidence is questionable. It only takes one stubborn juror to create a hung jury even when there is clear and convincing evidence that a crime was committed. If conviction requires a 10-2 vote and it is 9-2, that one juror can make the case go one way or the other, resulting in a mistrial or conviction.

In his farewell speech in January 1961 President Eisenhower warned us of the military industrial complex because of the potential of misplaced powers. Watch:

In the very last sentence, Eisenhower was talking about the military that secretly controls the outcome of every case: “The total influence, economic, political, even spiritual, is felt in every city, every state house, every office of the federal government. We must never let the weight of this combination
(Military Industrial Complex) endanger our liberties or democratic processes.”

Obama knows what is going on in the courts, being a lawyer himself. He knows the military flag is in every courtroom and church for a reason. He, together with the SEC are not taking any chances so they are winning cases outside court, before they even enter the courts. I believe the only reason John G. Roberts flipped and voted for Obamacare was maybe Obama had some dirt on him, like a tape or photos.

Secondly, companies are willing to settle outside court because they know that the shareholders and investors might start filing class action lawsuits and the prolonged litigation would definitely damage the company’s bottom line. The third and perhaps most important reason is the corporations do not want the IRS breathing down their necks. It would be hard to succeed against these federal alphabet agencies namely: the DOJ, SEC, IRS and risk also having the FBI join the party and start investigating criminal behavior of corporate executives. Right there you are going into RICO territory, and who wants that?

Above all, Obama’s Department of Justice and the SEC have succeeded in winning outside the courts, by getting off-the-record confessions after doing internal investigations with the help of whistleblowers, and offering immunity to corporations and executives who acknowledge that violations were made, but don’t have to admit to any wrongdoing.

How come you never hear the media tell people that every court is a profit-making business whose primary function is to sell securites in form of bundled up surety bonds on the secondary market? Because the corporate media is owned by the very corporations that trade the bonds and securities.


Be the first to comment - What do you think?  Posted by Joseph Earnest - October 10, 2012 at 8:02 am

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Bank of America to forgive up to $150,000 of homeowners’ mortgage debt

Bank of America

Newscast Media WASHINGTON, D.C.—Whether it is out of fear of being found in violation of the recent settlement with the Justice Department, or out of being genuinely contrite, America’s largest bank, Bank of America is allegedly forgiving and canceling up to $150,000 of debt owed by homeowners.

This move comes as an after effect of being sued by Barack Obama, through the Justice Department, for committing fraud and misrepresentation against homeowners, and also using deceptive means while foreclosing on homes. I have enclosed the entire lawsuit at the end of the document that can be read or download.

You have to give Obama credit for fighting mortgage fraud, and compelling the banks to address it, which is something I’m sure has angered the banks. However, at the end of the day, whether Obama is re-elected or not, he can be at peace with himself for having made an effort to stop the bleeding when fraud was rampant in the mortgage industry, and it is a decision he can live with.

Obama doesn’t use the word “fraud”, he uses words like: misconduct, improper behavior, misrepresentation, violation of homeowners’ rights, false information, unlawful foreclosures, unfair practices, wrongful conduct, deceptive practices, and many more terms. Yet we know that the above phrases are a polite way of accusing the banks of fraud. It softens the blow for the banks when “euphemisms” like deceptive practices or false information are used instead of fraud and forgery.

In Texas, if one commits forgery, one is immediately guilty of up to 20 years in jail with hard labor. See Chapter Two of this particular law: Texas Penal Code Title XIV Offenses Against Trade, Commerce ETC – Chapter 2: Forgery of Land Titles, Article 947. [550]).

This means that even attorneys who submit defective documents with either a back-dated notary stamp, or a blank endorsement stamped on the Note (robo-signing) would be found guilty and could even be arrested on the spot without trial, by the Sheriff’s department, if the fraudulent documents were forwarded to the relevant authorities.

The banks feel that “sugar-coated” words do not make them look bad, as opposed to the actual hardcore phrases describing their conduct. That way, once the dust settles, it is easier at a press conference for bank executives to say: “We corrected the wrongful conduct of our employees and agents,” than it is for executives to say, “We corrected the fraud and forgery committed by our employees agents.”

One of the widely-known methods to seize properties was through “robo-signing” which is the automated signing of documents, which is a fraudulent act, without actually reviewing the contents of the signed document.

Executives at Bank of America say they will begin mailing 200,000 letters offering certain customers mortgage principal reduction.

“If people get these things and toss them, they won’t be eligible,” says Ron Sturzenegger, the Bank of America executive charged with providing solutions to borrowers in need of mortgage assistance.

According to CNBC, in order to qualify for the modification, the borrower must answer the letter with full documentation of income, showing that under the terms of the modification they can still make the monthly payment. A borrower with no income would therefore not qualify. A borrower’s current monthly payment must be more than 25 percent of gross income, and the borrower must show they are unable to afford that.

Not all of the 200,000 borrowers who receive the letters are expected to respond CNBC reports. Executives say there is a level of fatigue among delinquent borrowers who have already received several notices or who may have gone through a failed modification process. Some borrowers simply don’t want to stay in their homes, while others may think the offer is a scam.

“They have been contacted by a lot of other people, and this offer may appear too good to be true,” says Sturzenegger

The bank has staffed up to handle the task, with 50,000 employees manning servicing desks, but the process will clearly take a lot of time.

Bank of America has suspended any foreclosure actions against these 200,000 borrowers until the process is complete, which might take up to two years.

Click here to read or download the lawsuit Barack Obama filed against the banks through the Department of Justice.


2 comments - What do you think?  Posted by Joseph Earnest - May 9, 2012 at 1:25 am

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SEC applies Admin. Procedure as one-two punch to UBS bank fraud

UBS bank

Newscast Media WASHINGTON, D.C.—The Securities and Exchange Commission has charged UBS Financial Services Inc. of Puerto Rico and two executives with making misleading statements to investors and concealing material information regarding securities. However, this approach is very unique that the SEC is taking. It bypasses the courts by the use Administrative Procedure Act, and directly charges the banks and executives involved with securities fraud, and even imposes a fine.

This is very powerful because the majority of judges in federal courts do not understand securities; attorneys also do not know how to defend such cases because they do not learn about securities laws in law school, so rather than risk losing a case based on a technicality or a judge’s unwillingness to address fraud committed by banks, the SEC is charging them directly and writing orders very much like a judge would do. This out-of-court approach will help investors and beneficiaries of fraudulently-created trusts resolve cases in which mortgage-backed securities are involved.

Just like a judge can issue an injunction, the SEC’s version is to issue a cease and desist from violating the Securities Act of 1933. Which means if a bank defrauds investors in regard to the existence of Trusts that don’t exist, and they bring it to the awareness of the SEC rather than the courts, they can receive relief for the fraud. Homeowners whose mortgages were put in defunct trusts secured by their deeds of trusts, benefit from such an order because it prohibits the banks and their agents from ever receiving any financial gain relating to such trusts. This way, homeowners are quietly winning injunctions against the big banks, without having to deal with the courts or when ruled against by the courts.

In this particular case of UBS in PR, the SEC used the Administrative Procedure to resolve the case. Here is exactly what the SEC said in its order:

In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions agreed to in UBS PR’s Offer.

Accordingly, pursuant to Section 8A of the Securities Act, and Sections 15(b) and 21C of the Exchange Act, it is hereby ORDERED that:

A. UBS PR cease and desist from committing or causing any violations and any future violations of Sections 17(a) of the Securities Act, Sections 10(b) and 15(c) of the Exchange Act, and Rule 10b-5 of the Exchange Act.

B. UBS PR shall, within 14 days of the entry of this Order, pay disgorgement of $11,500,000.00, prejudgment interest of $1,109,739.94, and a civil money penalty of $14,000,000.00 to the Securities and Exchange Commission.


When a bank violates Section 17 of the Securities Act of 1933, it means there was fraud involved in the sale or acquring of securities. As I have said before in previous articles, almost 100 percent of the Trusts banks claim to be Trustees over do not exist, so the mortgage-backed securities are not mortgage backed. Banks like Deutsche Bank, Option One, Wells Fargo and many others that claim to hold mortgages for Trust XYZ on behalf of Certificate holders would be in violation of Section 17(a)(2) if the Trusts in which those alleged mortgage-backed securities they claim to own do not exist.

Violation of Section 17(a)(1) and 17(a)(2) of the Securities Act of 1933

Section 17 – Anti-Fraud Authority

Section 17(a) provides one of the central sources of anti-fraud authority for law enforcement. In most securities actions you will see Section 17(a) used as a basis for jurisdiction (along with Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder).

“It shall be unlawful for any person in the offer or sale of any securities or any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act [15 USCS § 78c note]) by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly (1) to employ any device, scheme, or artifice to defraud, or (2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.”

So when the SEC issues a cease and desist to a bank from committing or causing any violations and any future violations of Sections 17 of the Securities Act of 1933, it is an equivalent of a permanent injunction to enjoin(stop) the bank from claiming any property rights to the related trust as highlighted in Section 17(a)(2) above.

Unfortunately not too many homeowners or even their attorneys are familiar with SEC rules, to be able to benefit from the rulings that are happening in regard to fraud. Only the savvy homeowners are the ones benefiting from such rulings, and when a “clear title” is filed, the bank, in accordance to the SEC order, cannot attempt to claim ownership over a property tainted with fraud, or else it will be in violation of the SEC order. This is something the media is forbidden to report, because the large corporations own the corporate media, and do not want an awakening to occur. You may read or download the UBS cease and desist order here.


2 comments - What do you think?  Posted by Joseph Earnest - May 4, 2012 at 12:55 am

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SEC sues Texas bank for engaging in fraudulent mortgage scheme


Newscast Media WASHINGTON, D.C. —The Securities and Exchange Commission today announced that it charged Franklin Bank Corp.’s former chief executives for their involvement in a fraudulent scheme designed to conceal the deterioration of the bank’s loan portfolio and inflate its reported earnings during the financial crisis. The SEC alleges that former Franklin CEO Anthony J. Nocella and CFO J. Russell McCann used aggressive loan modification programs during the third and fourth quarters of 2007 to hide the true amount of Franklin’s non-performing loans and artificially boost its net income and earnings. The Houston-based bank holding company declared bankruptcy in 2008.

“Nocella and McCann used the loan modification scheme like a magic wand to change non-performing loans into performing assets,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Their disclosure and accounting tricks misled investors into believing that Franklin was outperforming other banks during the height of the financial crisis.”

What the SEC means is that these banks sold “toxic assets” to investors in form of Mortgage-Backed Securities (MBS) that were pooled together into Trusts. The banks were first compensated through TARP (Troubled Assets Relief Program) money using billions of taxpayers’ money. They were also compensated a second time through insurance (credit default swaps), and the third compensation came through the stream of monthly payments by homeowners. The fourth compensation came when banks were unable to modify loans, and sold the homes at public auctions through foreclosure.

So these banks have earned money four-fold, and are not being held accountable. It seems the magic word is to add the word “bank” in a business name and one is virtually immune from being charged with illegal business practices. However, the SEC is slowly changing that, yet whether the courts will be willing to hold the banks accountable remains to be seen.

The SEC’s complaint filed in U.S. District Court for the Southern District of Texas seeks financial penalties, officer-and-director bars, and permanent injunctive relief against Nocella and McCann to enjoin them from future violations of the federal securities laws.

The SEC has a strong case under Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5]

15 USC § 78j(b) – Manipulative and deceptive devices states:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—

(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act), any manipulative or deceptive device or contrivance in
contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

17 C.F.R. § 240.10b-5 states:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

The securities banks deal with are Mortgage-Backed Securities (MBS). A company that engages in the business of investing, reinvesting, owning, holding, or trading in securities should abide by the Investment Company Act of 1940 also referred to as (15 USC § 80a–3) that requires any such business to be registered in order to conduct business.

Almost 100 percent of these banks that claim to be Trustees for XYZ Trust are operating illegally because the Trusts are defunct and do not exist. Unfortunately judges and attorneys seem to be unfamiliar or unwilling to learn about the securitization process, so one has to school them using charts, tables or
diagrams. The SEC is doing just that, and we should expect more diagrams to be provided at trial.

When fighting such cases involving banks claiming to be Trustees, acting on behalf of some Trust, one has to be willing to fight them all the way to the Supreme Court, since those justices are more knowledgeable in dealing with such complex laws.

For more information about this enforcement action, contact:

David Woodcock
Regional Director, SEC’s Fort Worth Regional Office

David Peavler
Associate Regional Director, SEC’s Fort Worth Regional Office


Be the first to comment - What do you think?  Posted by Joseph Earnest - April 10, 2012 at 5:01 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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Fannie Mae and Freddie Mac executives charged with securities fraud

SEC charges Fannie Mae and Freddie Mac execs with fraud

Newscast Media WASHINGTON D.C. — The Securities and Exchange Commission has charged six former top executives of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans.

Fannie Mae and Freddie Mac each entered into a Non-Prosecution Agreement with the Commission in which each company agreed to accept responsibility for its conduct and not dispute, contest, or contradict the contents of an agreed-upon Statement of Facts without admitting nor denying liability. Each also agreed to cooperate with the Commission’s litigation against the former executives. In entering into these Agreements, the Commission considered the unique circumstances presented by the companies’ current status, including the financial support provided to the companies by the U.S. Treasury, the role of the Federal Housing Finance Agency as conservator of each company, and the costs that may be imposed on U.S. taxpayers.

Three former Fannie Mae executives — former Chief Executive Officer Daniel H. Mudd, former Chief Risk Officer Enrico Dallavecchia, and former Executive Vice President of Fannie Mae’s Single Family Mortgage business, Thomas A. Lund — were named in the SEC’s complaint filed in U.S. District Court for the Southern District of New York.

The SEC also charged three former Freddie Mac executives — former Chairman of the Board and CEO Richard F. Syron, former Executive Vice President and Chief Business Officer Patricia L. Cook, and former Executive Vice President for the Single Family Guarantee business Donald J. Bisenius — in a separate complaint filed in the same court.

“Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was,” said Robert Khuzami, Director of the SEC’s Enforcement Division. “These material misstatements occurred during a time of acute investor interest in financial institutions’ exposure to subprime loans, and misled the market about the amount of risk on the company’s books. All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country’s investors.”

The SEC’s investigation of Fannie Mae was conducted by Senior Attorneys Natasha S. Guinan, Christina M. Marshall, Liban Jama, Mona L. Benach, and Associate Chief Accountant, Peter Rosario, under the supervision of Assistant Director Charles E. Cain, and Associate Director Stephen L. Cohen. Sarah Levine and James Kidney will lead the SEC’s litigation efforts.

The SEC’s investigation of Freddie Mac was conducted by Senior Attorneys Giles T. Cohen and David S. Karp and Assistant Chief Accountant Avron Elbaum of the SEC’s Division of Enforcement under the supervision of Assistant Director Charles E. Cain and Associate Director Stephen L. Cohen. Kevin O’Rourke and Suzanne Romajas will lead the SEC’s litigation efforts.

For more information about these enforcement actions, contact:

Robert S. Khuzami, Director
(202) 551-4894

Lorin L. Reisner, Deputy Director
(202) 551-4781

Stephen L. Cohen, Associate Director
(202) 551-4472

Charles E. Cain, Assistant Director
(202) 551-4911


Be the first to comment - What do you think?  Posted by Joseph Earnest - December 20, 2011 at 12:50 am

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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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Former Countrywide employee exposes mortgage fraud on grand scale

Embattled Countrywide facing fraud lawsuits

Newscast Media HOUSTON, Texas –Perhaps the most in-depth reporting and investigation on a pattern of fraud at Countrywide Financial Corp., once the nation’s largest mortgage lender, iWatch News staff writer Michael Hudson details the story of Eileen Foster, Countrywide Financial Corp. fraud investigation chief, who uncovered massive fraud within the company and, federal officials say, paid a price for doing so.

According to iWatch News, Eileen Foster, the company’s new fraud investigations chief, intercepted documents before they reached the shredder and was astounded at what she saw.

“You’re looking at it and you’re going, Oh my God, how did it get to this point?” Foster recalls. “How do you get people to go to work every day and do these things and think it’s okay?”

Foster claims by early 2008, she’d concluded that many in Countrywide’s chain of command were working to cover up massive fraud within the company — outing and then firing whistleblowers who tried to report forgery and other misconduct. People who spoke up, she says, were “taken out.”

Soon after the discovery of fraud, Foster believes that in retaliation, Bank of America fired her. She immediately sued. Her lawsuit was resolved last year, the terms of which remain disclosed.

Currently, Bank of America and other big players are being pressured by federal and state to settle charges they used falsified documents to speed homeowners through foreclosure. Lawsuits filed on behalf of investors claim Countrywide lied about the quality of the pools of mortgages that the lender sold them during the home-loan boom.

Most recently AIG sued Bank of America for selling them fraudulent Mortgage-Backed Securities (MBS) causing BofA’s stock to drop like a bad habit. The suit claims:

“This case arises from a massive fraud perpetrated by Defendants Bank of America, Merrill Lynch, and Countrywide that has resulted in more than $10 billion in damages to AIG, and ultimately American taxpayers. AIG brings this action as part of its overall efforts to recoup such damages from these defendants and other parties.”

(American International Group Inc et al v. Bank of America Corp et al, New York State Supreme Court, New York County No. 652199/2011). Click here to view entire AIG lawsuit and its details.

Accounts from Foster and other whistleblowers now put Bank of America in a very uncomfortable position. To make matters worse, the Department of Labor conducted an independent investigation after Eileen Foster filed a complaint, and its investigation found that indeed Foster was fired by Bank of America out of retaliation.

Gregory Lumsden, former head of Countrywide’s subprime division told iWatch News, “I don’t care if you’re Microsoft or you’re the Golf Channel or Dupont or MSNBC: companies are going to make some mistakes. What you hope is that companies will deal with employees that do wrong. That’s what we did.”

(Eileen Foster was mortgage fraud investigations chief for Countrywide Financial Corp., which eventually became Bank of America. Michael Hudson covers business and finance for iWatch News. The Columbia Journalism Review called him the reporter who “beat the world on subprime abuses.)


1 comment - What do you think?  Posted by Joseph Earnest - September 23, 2011 at 6:39 pm

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MERS Deeds of Trust and the enforceability problem they face

The Note and the Deed are inseparable

Newscast Media HOUSTON, Texas — One of the most innovative ways banks have avoided paying county clerks fees for transferring titles from one property owner to another is by the use of Mortgage Electronic Registration System, or MERS. The problem with MERS is that its operational model requires a bifurcation or separation of the Deed of Trust from the promissory note. In almost every MERS loan, the note names a different entity, while the Deed names MERS as the beneficiary. To perfect a lien, the holder of the note should be the same entity that holds the Deed. However, with the securitization of most mortgages, and the use of MERS, it is almost impossible for that to happen.

MERS realized it hada problem and in February this year released a memo asking all entities to stop foreclosing in its name. The memo in part reads: “To comply with this guidance, MERS Members should implement the following practices, effective immediately.

. . . In recent months legal challenges have arisen regarding alleged inadequacies and improprieties in the foreclosure process including allegations of insufficient or incorrect supporting documentation and challenges to the legal capacity of parties’ right to foreclose . . . MERS is planning to shortly announce a proposed amendment to Membership Rule 8. The proposed amendment will require members to not foreclose in MERS’ name. Consistent with the Membership Rules there will be a 90-day comment period on the proposed Rule. During this period we request that Members do not commence foreclosures in MERS’
name.” The announcement can be viewed here.

MERS realized it could not demonstrate an agency relationship between itself and the note holder that gives MERS the authority to transfer assignments from one entity to another. Furthermore, it would be against MERS’ procedure of operation to make an assignment yet MERS acknowledges in its very own Procedures Manual that it cannot make any transfer of assignments to another. MERS’ own admission: “MERS cannot transfer the beneficial rights to the debt. The debt can only be transferred by properly endorsing the promissory Note to the transferee.” (page 63). You may read or download the entire manual here.

So if MERS cannot transfer the assignments, how is it possible that in foreclosure actions judges are presented with pre-dated documents that purport to transfer the assignment from MERS to another entity, usually a bank? Since MERS doesn’t do the assignments, in most cases, it is the foreclosure mills that create these documents themselves and pretend MERS transferred the assignment. It is the reason why MERS is prohibiting these firms and banks from foreclosing in its name.

MERS has itself to blame because it is peddling its corporate seal on its Website for $25. Virtually any foreclosure mill can purchase the seal, create and notarize an alleged Deed of Trust, present it to a judge and proceed to foreclose, if the homeowner does not object the documents. The MERS corporate seal being peddled can be seen here. There is also a live link, which I suspect they may disable soon.

The Note and the Deed are inseparable

Because the MERS system separates the note and the Deed which is evident since both documents name different entities, the Deed of Trust is rendered unenforceable because it is in violation of Carpenter v. Longan. In 1872, The United States Supreme Court announced this classic statement in this rule:

“The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.” (quoting Carpenter v. Longan, 83 U.S. (16 Wall) 271, 274 (1872))).

Also In re BNT Terminals, Inc., 125 B.R. 963 (Bankr. N.D. Ill. 1990) (“An assignment of a mortgage without a transfer of the underlying note is a nullity. . . . It is axiomatic that any attempt to assign the mortgage without transfer of the debt will not pass the mortgagee’s interest to the assignee.”

In another ruling, First Nat’l Bank of SACO v. Vagg, 212 P. 509, 511 (Mont. 1922) “A mortgage, as distinct from the debt it secures, is not a thing of value nor a fit subject of transfer; hence an assignment of the mortgage alone, without the debt, is nugatory, and confers no rights whatever upon the assignee. The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while the assignment of the latter alone is a nullity. The mortgage can have no separate existence.”

In Southerin v. Mendum, 1831 WL 1104, at * 7 (N.H. 1831) (“[T]he interest of the mortgagee is not in fact real estate, but a personal chattel, a mere security for the debt, an interest in the land inseparable from the debt, an incident to the debt, which cannot be detached from its principal.”)

Another ruling was in Barton v. Perryman, 577 S.W.2d 596, 600 (Ark. 1979) and also in Kelley v. Upshaw, 246 P.2d 23 (Cal. 1952) (“In any event, Kelley’s purported assignment of the mortgage without an assignment of the debt which is secured was a legal nullity.”)

The Deed of Trust problem

The biggest problem MERS Deeds of Trust face is that there is no Grantor, Grantee or what has been Granted that was named. Many lawyers are on the lower end of the learning curve when it comes to these issues because MERS and securitization are fairly new. However, many courts have held that a document attempting to convey an interest in realty fails to convey that interest if the document does not name an eligible Grantee or Grantor.

Courts around the country have long held, “There must be, in every Grant, a Grantor, a Grantee and a thing Granted, and a deed wanting in either essential is absolutely void.”

Look at any MERS Deed of Trust, you’ll see that most of them violate this rule. In the case of Richey v. Sinclair, 47 N.E. 364, 365 (Ill. 1897) the court ruled, (“The law is well settled that a deed without the name of a Grantee is invalid. It is said there must be in every Grant a Grantor, a Grantee, and a thing Granted; and a deed wanting in either essential will be void.”).

In Disque v. Wright, 49 Iowa 538, 540 (1878) (“It has been frequently held that slight omissions in the acknowledgment of a deed destroy the effect of the record as constructive notice. A fortiori, it seems to us, should so important and vital an omission as that of the name of the Grantee have that effect.”)

In Allen v. Allen, 51 N.W. 473, 474 (Minn. 1892) (omission of name of Grantee invalidated conveyance because “[a] legal title to real property cannot be established by parol.”)

The most memorable is by the NY Supreme Court in in Chauncey v. Arnold, 24 N.Y. 330, 338 (1862) (“No mortgagee or obligee was named in [a mortgage], and no right to maintain an action thereon, or to enforce the same, was given therein to the plaintiff or any other person. It was, per se, of no more legal force than a simple piece of blank paper.”)

Back-dated or retroactive assignments of the Deed

Most cases that you read about, homeowners claim that they were presented with a back-dated assignment of the Deed of Trust after a foreclosure action had commenced. The problem is that if the assignment happened after court papers were filed, then the foreclosing entity never had standing to begin with therefore can’t foreclose.

In order to commence a foreclosure procedure, the party must have a legal or equitable interest in the mortgage (Katz v East-Ville Realty Co., 249 AD2d 243, 243).

A “foreclosure of a mortgage may not be brought by one who has no title to it.”
(Kluge v Fugazy, 145 AD2d 537, 538).

An assignee cannot maintain an action for any part of a claim which has not been assigned to him. (Works v. Winkle , 234 S.W.2d 312, 315 (Ky. App. 1950)).

A mere expectancy is not enough to establish standing, a party must prove a “present or substantial interest.” Plaza B.V. v. Stephens, 913 S.W.2d 319, 322 (Ky.1996)(quoting Ashland v. Ashland F.O.P. No.3, Inc., 888 S.W.2d 667 (Ky. 1994).

In this particular case, defendants did not have an interest in the mortgage at the time the foreclosure action was commenced (LaSalle Bank Natl. Assn. v Ahearn, 59 AD3d at 911).

The Court in L aSalle found that: “The written assignment submitted by plaintiff was indisputably written subsequent to the commencement of this action and the record contains no other proof demonstrating that there was a physical delivery of the mortgage prior to bringing the foreclosure action.” (LaSalle Bank Natl. Assn. v Ahearn,59 AD3d 912).

As such, a retroactive assignment cannot be used to confer standing upon the assignee in a foreclosure commenced prior to the execution of the assignment.(LaSalle Bank Natl. Assn.,59 AD3d 912).

It now makes sense that MERS took a close look at its Deeds and recognized this problem, however almost 60 percent of American homes have Deeds in MERS name. It is up to homeowners and their attorneys to challenge the enforceability of these documents, if they find themselves in court fighting to keep their homes.


Be the first to comment - What do you think?  Posted by Joseph Earnest - June 17, 2011 at 8:03 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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How homeowners are fighting back and winning to prevent foreclosure

Newscast Media — Below are guidelines recommended to homeowners facing foreclosure should follow to empower them in order to file a suit against your lender.

(i) Look at your Truth in Lending statement and your note. Almost everyone will have a principal and interest on the note, that is different from the principal and interest on the Truth in Lending statement.

(ii) Run an amortization on both of them. The amount that you would overpay when you run the Truth and Lending statement may amount to tens of thousands of dollars as compared to what the actual numbers are on the note. (e.g $45,000)

(iii) After running the calculations, take that as a fraud claim, because in a fraud claim you do not file for the amount you have been defrauded of, but the actual amount you would have been defrauded of, had their plan come to fruition. However, you don’t sue for $45K. You sue for triple.($45,000 X 3 = $135,000

(iv) Also look at the lender fees. The lender is only allowed to charge the borrower those fees the borrower would have to pay if they purchased the house in cash, and those fees, the lender must pay to a third party vendor. But at closing, they didn’t provide you with any documentation to show you that the fees were (a) Proper (b) Allowed by law (c) That the services provided by the vendor were necessary (d) That the amounts charged were reasonable (e) Neither did he show you his disbursement, to show you that he didn’t take an unauthorized markup on the amounts charged. If they can’t produce these documents, then the transaction was bogus. It was a fraud, and the bank can’t foreclose on you.

(v) Ask them to show you the Original Note. Because these mortgages have been sold over and over again, it is almost impossible for the party foreclosing on you to produce the original note. Most mortgages also have MERS (Mortgage Electronic Registration System) as the beneficiary which has already been ruled by courts as fraudulent.

(1) U.S. Bankruptcy Court Judge Linda Riegle has ruled that the Mortgage Electronic Registration System (MERS) could not represent lenders seeking to foreclose on delinquent homeowners already in bankruptcy unless it could produce the actual loan note. This goes to the heart of how home lending has evolved over the past two decades, with a loan rarely staying on the books of the originator but often being sold several times to other institutions or investment groups. As a result, producing a loan document is far more complex than opening a drawer in a filing cabinet.

(2)A California judge made this ruling about MERS: “Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is VOID under California law.”

In other words, since MERS didn’t own the underlying note, it couldn’t transfer the beneficial interest of the Deed of Trust to Citibank. In this decision the court found that MERS was acting “only as a nominee,” under the Deed of Trust, and that there was no evidence of the note being transferred.

The judge’s opinion in this case also said that “several courts have acknowledged that MERS is not the owner of the underlying note and therefore could not transfer the note, the beneficial interest in the deed of trust, or foreclose on the property secured by the deed”, citing cases of: In Re Vargas, California Bankruptcy Court; Landmark v. Kesler, Kansas decision as to lack of authority of MERS; LaSalle Bank v. Lamy, a New York case; and In Re Foreclosure Cases, the “Boyko” decision from Ohio Federal Court.

And the court concluded by stating:

“Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.”

What the courts in California said is that MERS can’t foreclose and CITIBANK can’t collect.

Mortgage Crime:
ice Legal :

2 comments - What do you think?  Posted by Joseph Earnest - October 29, 2010 at 11:03 pm

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