Massive Multi-billion Mortgage Loan Fraud Creating Second Housing Crisis
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The genie is out of the bottle, but it is more like Pandora’s box with massive loan fraud and negligence emerging into our nations crippled economy like the radiation from Fukushima. This is a long post and ties into the 60 Minutes piece aired tonite on home foreclosures and document fraud.
After working in the automotive industry in the 70s and 80s, I worked in the Real Estate title insurance industry for six years in the early 90s as a title searcher and examiner. The job of searching title is to examine public records and the chain of title so when a seller passes title to a buyer, there are no issues. You want a clean title. If there are matters of record, they are revealed in a title policy. In a real estate transaction, title companies do most of the heavy lifting to make sure the title is clean. Title companies are regulated by each state. Mortgage lenders are NOT regulated in the same stringent manner.
One of things you look for in doing your search of a property is if there are any outstanding TRUST DEEDS – loans on the property. That means a first trust deed or a second or third, etc. Often, the originator of the loan — a bank or mortgage lender called the Beneficiary — will ASSIGN THEIR INTEREST IN THE TRUST DEED (the loan), to another entity. So, you may think you have a loan with your local bank like Wells Fargo, but they have ASSIGNED THEIR INTEREST to some other entity. So, now that company holds the loan and should have a copy of the Trust Deed and assignment in their possession.
When I heard Treasury Secretary Hank Paulson in October 2008 state to the Congress that there was a problem in knowing the asset value of the MBS, I knew we were on the edge of a major massive problem.
Follow along here: THERE IS A PAPER TRAIL ON ALL RECORDED TRANSACTIONS. LIKE the GRANT DEED WHICH SHOWS THE OWNERSHIP — THE GRANTOR AND GRANTEE (SELLER AND BUYER) — there is a PAPER TRAIL. IF, there is an interuption in the paper trail — this is called a BREAK IN THE CHAIN OF TITLE — that’s a problem. The key is RECORDED DOCUMENTS can be searched. No recorded documents and they float out into the ether.
Likewise, LENDERS — BANKS AND MORTGAGE COMPANIES — have a paper trail of the LOANS issued via their trust deed documents. AT THE VERY LEAST THEY NEED TO HAVE THEM INTERNALLY FOR AUDIT PURPOSES. For Title search purposes, IF THE TRUST DEED IS RECORDED, THERE IS A PAPER TRAIL available from the county recorders office.
THE BASICS: The TRUST DEED document shows three parties:
* The Trustor, which is you, the borrower
* The Trustee, which is an entity that holds “bare or legal” title
* The Beneficiary, which is the lender
OK, HERE COMES THE GOOD PART…
When the Beneficiary ASSIGNS THEIR INTEREST to another entity, a document called a ASSIGNMENT is drawn up. OFTEN, BUT NOT ALWAYS, IT IS RECORDED IN THE PUBLIC RECORDS. IT DEPENDS ON THE LAW IN THAT MUNICIPALITY. There can be multiple assignments made on any given property.
In the case of many loans made prior to 2008, ASSIGNMENTS were NOT handled properly by the lenders.
Here is some legal information that should be read: Read the whole thing.
RESPA STATUTES GO HERE
California is what is called a “race notice” state, meaning that the date upon which a conveyance is recorded can have a great deal of significance. If you were to take out a mortgage, but for some reason the mortgage company neglected to record it, and you subsequently took out a second mortgage which was properly recorded, in the event of
foreclosure the second mortgage company would have priority over the first with regard to recovering funds to satisfy its loan. The second mortgage company was the first to give public notice of its interest, and thus won the “race”.
In terms of the mortgage, as the original mortgage company has recorded the mortgage in the chain of title for the property, subsequent lenders are on notice of its interest. The successor mortgage company assumes the rights of the first mortgage company, and
is similarly protected. The second mortgage company may wish to record the transfer in order to ensure that appropriate contact information is reflected in the chain of title in case another mortgagor or lien holder attempts to foreclose, but such a notice would be recorded for its own protection, not out of a legal obligation or duty.
The original mortgage company, however, may be under a duty to notify you of the transfer. Obviously, mortgage companies choose to inform their clients of transfers for the obvious reason that the mortgage payments must be sent to the correct place. However, sometimes mortgage companies fail to give proper notice to the borrower, and
that failure may provide a defense against foreclosure. See, e.g., Winger v EMC Mortgage Corporation, 103 Cal. App. 4th 1125; 127 Cal. Rptr. 2d 685 (2002), in which a mortgagor neglected to provide notice required by the Real Estate Settlement Procedures Act of 1974 (RESPA), 12 U.S.C. 2601 et seq. The estate of the borrower was able to present
the failure to provide proper notice to the borrower as a defense against foreclosure. (If you review that case, you will note that the court did not discuss the failure to provide notice of the transfer as either a defense against the transfer or as a defense against the
IF YOU THINK YOU HAVE A LEGAL ISSUE REGARDING ASSIGNMENT(S) OF YOUR TRUST DEED WHICH MAY BE AFFECTING YOUR RIGHTS CONTACT AN ATTORNEY.
Tonite, while watching 60 Minutes, I am watching their segment about the second wave of housing fraud to hit everyday Americans. In my humble opinion, this requires a class action lawsuit immediately. It requires investigation and possible prosecution of the banks involved: Bank of America, HSBC, Citibank, Deutsche Bank, US Bank, and Wells Fargo. These companies are guilty of negligence with their customers.
ALL the banks who traded MBS like baseball cards are involved in this massive fraud. The paperwork is the accounting trail and ALL these banks and mortgage lenders know they are to retain copies of their business transactions. The misplacement of these documents is negligence.
Banks made loans to homeowners, then bundled batches of those loans and sold them as Mortgage Backed Securities (MBS) to investment banks — the too-big-to-fail banks, i.e. Lehman Brothers, JP Morgan Chase, Morgan-Stanley, Merrill Lynch, Goldman-Sachs, and Bear Stearns who all participated in MBS risky behavior. These investment banks would in turn sell the ASSET VALUE to investors here and abroad. They would sell them for instance to STATE GOVERNMENTS LIKE OHIO or to CALIFORNIA. They were offered up to be as safe as U.S. Treasury bonds, which are the safest and which most State public pensions have traditionally been tied to.
The problem came after the 2008 collapse when banks used a loan servicer like, LPS Lender Processing Services, to farm out document services to other fly-by-nights to facilitate fake documents to enable the banks to foreclose. Why? Because the assignments have been lost, mislaid, destroyed, not made at all, or who knows! MEANING MORE NEGLIGENCE.
60 Minutes zeroed in on a company called DOCX. They said DOCX is a sweat shop for forged mortgage documents. People were made Vice Presidents like magic without having any experience in the mortgage lending or banking industry! No job experience required. These VPs were signing 4000-5000 mortgage documents a day! Fake notarization also was in play. These VPs took on the identity of another person and used their name to sign the documents. Thus, MAJOR FRAUD WAS BEING COMMITTED.
View the entire 60 Minutes piece, click here
BTW: Hank Paulson served as the Chairman and Chief Executive Officer of Goldman Sachs.
These guys protect their own. Thus, the title of the award winning documentary, Inside Job. Buy it and view it and then demand that ALL OF THESE BANKS be defunded and new banks be created. We must clean up our banking industry.
Mortgage-Backed Securities Litigation