Wednesday, July 20, 2011




Countrywide’s “was a business model based on deceit and corruption and the harm they caused to American consumers is absolutely massive and extraordinary.” — Jon Leibowitz, chairman of the trade commission
“Countrywide gave them incorrect accountings about how much they owed on their mortgages or added fees and escrow charges without notice, the trade commission said — Gretchen Morgenson from article below
EDITOR’S COMMENT: Once again, attention is deflected from the real problem, to wit: the pretenders made up the figures that were owed because it didn’t matter to them what was owed — they just wanted the home as a freebee without any investment on their part whatsoever. And the issue of whether the lien was perfected at the time of the closing on the loan is being completely ignored.
Just think it through. If Countrywide was demanding money that was inaccurately stated even from the prospective of just the borrower’s payments, then how far off were they if you take into consideration third party payments, (including payments from Countrywide) to “creditors?” And if the balance due existed at all, and was misrepresented in both judicial and non-judicial foreclosures, then the process by which they foreclosed is fatally flawed for that reason alone, without considering all the other reason that the foreclosures are fatally flawed.
If the foreclosures are fatally flawed then there is an obvious question of fact as to what extent the obligation was misrepresented, which leads to the question of to whom the obligation is owed. AND THAT in turn leads to the question of “at what point in time were you the creditor and when did you know it?”
The legal analysis has been both spotty and incorrect from the point of view of where to start the inquiry. All facts point to improper, faulty and defective drafting and execution of documents when the loan was originated. Both the lender and the terms of the transaction between the source of funds (investor/lender) and the receiver of funds (homeowner/borrower) are incorrectly described and identified on the note and mortgage.
This was intentional, so the UCC rules governing splitting the note and mortgage applies. It is only in foreclosure that the pretenders pretend that the note and mortgage are joined and always have been together. This was not the case. The actual monetary transaction was largely undocumented and the alleged lien was never perfected.
  1. If the originating documents did not describe the terms and parties correctly they can hardly be used in foreclosure as the sole basis of actions, allegations or proof of the right to foreclose.
  2. Yet “starting from the beginning” seems to be what most analysts seem to be missing — even the best of us. I submit that if we do start at the beginning we will discover that in most securitized loans, the loans were sold before they were created.
  3. The money used was subject to a PSA and Assignment and Assumption Agreement that predated the application for loan.
  4. Thus the basis of the transaction was the sale forward to investors who were buying bonds that WOULD be mortgage-backed when the loans were created.
  5. The moment the loan was funded it was the PSA and Assignment and Assumption Agreement that were operating. Without those, the originator would not have continued posing as a lender, since it would then have been required to actually fund the loan and take the risk of non-payment.
  6. But the investor (who was the party accepting the risk of non-payment) was receiving a bond while the homeowner was signing a note. This is a disconnect that cannot be cured without consent of the investor and buyer in writing — something we all know is unlikely given current market conditions.
  7. The principal fact of any transaction is the actual obligation — not the documents providing evidence of the transaction.
  8. While certain presumptions can be made in the absence of objection, it is not the note that creates the obligation, it is the actual transaction in which money exchanged hands. 
  9. At no time under the PSA or Assignment and Assumption Agreement could the loan ever be owned by the originator, which makes it impossible for the originator to be named on the note and mortgage without creating a fatal defect. 
  10. Thus the note is either accurate or it is not. If it is not, then the security instrument (mortgage or Deed of Trust) does not secure the obligation. Rather it pretends to secure a transaction that never occurred — one between the originator, who did not supply any funds, and the homeowner who received money from a third party in what REG and TILA calls a table funded loan and is considered predatory lending per se. 
  11. The fact that documents exist purporting to describe a transaction does not mean the transaction ever took place, as described. It is the facts that govern in all cases, not documents that purport to recite facts that are untrue.
  12. The originator was not, even for a moment in time, the obligee. The originator in nearly all cases was a straw-man just as MERS was used as a straw-man and is now under a cease and desist order. The obligee was the source of actual funds and was not disclosed.
  13. The failure to disclose the actual obligee is a fatal defect in the note and mortgage.
  14. The only way to cure the defect is to get a signature from the borrower acknowledging the true obligee which is disclosed on the instrument. If that is obtained, all sins are forgiven, but it is only effective from the date of that second instrument or court order, if the obligee brings an appropriate lawsuit in a court of competent jurisdiction to establish itself as the obligee by pleading and proving that it was the source of funds or should be considered the source of funds because it acquired the obligation in a transaction with the true obligee — not in a document that states the rights were acquired from the straw-man.
  15. The subsequent assignment from the originator as straw-man looks good on paper but is completely worthless and invalid. It cannot cure the defect because the borrower’s signature is absent from the new instrument. Thus the arguments over robo-signing on the assignments, endorsements and the issue of delivery of documents of transfer, and even delivery of the original note are all red herrings. They count for nothing.
  16. The reason MERS is under cease and desist orders is that it establishes a private, secret system in which the marketplace has no way of knowing who the eventual claimed “creditor” will be until it is decided later by the securitization participants.
  17. Besides being illegal under TILA, Reg Z and most state laws governing the recording of interests in real property, it causes confusion in the marketplace because no successor in interest can possibly know whether they are getting an interest from anyone who possessed an interest.
  18. The same holds true for ANY straw-man. If it doesn’t have any interest in the transaction except for the fee it earned in posing as the lender, it has nothing to assign.
  19. Thus current analysis is missing the forest for the trees. By directing attention to the process of assignment, it leaves the question of the the actual obligation, terms and parties in the dust. If this was a question on a bar exam, the best the applicant could hope for was partial credit for good analysis but missing the point completely.
  20. The only correct conclusion is that the homeowner received a loan for which he was obligated to make payments, subject to the terms expressed in the PSA and Assignment and Assumption Agreement plus the terms that can be proven by looking at parts of the closing documents. This describes the total obligation and rights and duties of the parties.
  21. The note and mortgage (or Deed of Trust) do NOT describe the entire transaction, nor do they correctly describe or identify the terms, conditions, provisions or parties. Thus until the defect is cured (with the homeowner’s signature) the homeowner has no encumbrance on the property and therefore there is nothing to foreclose because there is no instrument upon which a proper foreclosure can proceed.
  22. As shown in part below, Countrywide did not do a proper accounting for all terms and conditions and imposed illegal and fraudulent charges in the process of trying to foreclose in its own name or the name of a party who never received an interest in the obligation.
  23. For the same reasons that the parties and terms were not properly described or identified, the claim for money is wrong on each notice of default and each notice of sale and each foreclosure complaint.
  24. And it follows that the auction sale was improper and fraudulently obtained.
  25. And THAT leads to the inescapable conclusion that without a creditor being identified and described in the documents upon which foreclosure was sought, there could be no valid credit bid — i.e., neither cash nor note was tendered at the time of sale. The “bid” consisted of a vacant pretense supporting the desire of the so-called foreclosing party (also a straw-man in most cases) to claim a house in which it had absolutely no financial interest.
  26. What about the obligation? That is up to the investor and the borrower. After a PROPER accounting of all funds, in and out, there may be a balance due and there might not. But at the present time, absent some exotic legal theory invented in the courts, the obligation, if there is one, is and always has been unsecured.

450,000 to Get Payments in Countrywide Settlement

More than 450,000 borrowers who were charged excessive fees by Countrywide Home Loans when they fell behind on their mortgages will finally begin receiving the$108 million the company agreed to pay in a settlement struck with the Federal Trade Commission in June 2010, the agency said Wednesday. The number of consumers recovering money in the settlement is the biggest in the F.T.C.’s history and wound up being double what the commission had estimated.
“It is astonishing that one single company could be responsible for overcharging more than 450,000 homeowners, which is more than 1 percent of all the mortgages in the United States,” Jon Leibowitz, chairman of the trade commission, said in an interview. Countrywide’s “was a business model based on deceit and corruption and the harm they caused to American consumers is absolutely massive and extraordinary.”
The excessive fees and improper charges were levied on borrowers whose loans were serviced by Countrywide. Most of those receiving money under the settlement — almost 350,000 customers — were routinely charged excessive amounts by Countrywide for default-related services.
To profit from property inspections, title searches and maintenance on homes going through foreclosure, Countrywide set up subsidiaries to do the work and marked up the cost of the services by more than 100 percent. The company’s strategy was designed to increase profits from default-related services during bad economic times, the trade commission said. Some troubled borrowers were charged $300 by Countrywide to mow their lawns, for example.
Another 102,331 people will share in the settlement because Countrywide gave them incorrect accountings about how much they owed on their mortgages or added fees and escrow charges without notice, the trade commission said. Because these borrowers had filed Chapter 13 bankruptcies to try to keep their homes, the erroneous amounts supplied by Countrywide were also filed with the courts. Of these borrowers, about 43,000 were hit with improper fees that Countrywide levied after their bankruptcies had been concluded and they were no longer under court supervision.
The recipients under the settlement are borrowers whose loans were serviced by Countrywide between Jan. 1, 2005, and July 1, 2008. In addition to being the nation’s largest mortgage lender, Countrywide was also the biggest loan servicer, administering $1.4 trillion in mortgages. Countrywide nearly collapsed under the weight of its subprime lending, however, and was acquired in a fire sale by Bank of America in 2008.
It took more than a year to identify all of the borrowers injured by Countrywide’s practices because the company’s records were completely disorganized and chaotic, according to people briefed on the investigation. After the deal was struck, Bank of America was given 30 days to provide the F.T.C. with a list of borrowers who had been overcharged. The company failed to meet the deadline and its later assessments of those who had been victimized were found to be incomplete.
Ultimately, Bank of America had to hire an accounting firm to determine that it had correctly identified all the borrowers who were owed money. Most of the consumers receiving money in the settlement will get $500 or less, but 5 percent will receive $5,000 or more, the trade commission said.
When Bank of America settled the F.T.C.’s charges last year, it said it was doing so “to avoid the expense and distraction associated with litigating the case.” The company did not admit wrongdoing but was barred from the conduct cited by the commission. It also agreed to use a “data integrity program” to ensure that the information they use in servicing loans in Chapter 13 cases is accurate.
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20 Responses

  1. maybe i am Zur. i’ve gone back and read it a couple of times now. i’m looking in the 2nd paragraph of the yellow text box. and I’m not arguing all of the standing or real party in interest stuff, just saying the amount of default isn’t the linchpin issue. there’s no net change in the outcome (or at least there shouldn’t be) if the amount in default is mis-stated by $12
  2. In fact, Neil prefaces #23 with a clear indication of what he is saying: “For the same reasons that the parties and terms were not properly described or identified, the claim for money is wrong…”
    In other words, because wrong parties are identified in Note/DOT, the claim of those parties to be owed money in a notice of default is likewise wrong. He said nothing about the amount being wrong or right.
  3. Tn,
    I think you are arguing against something Neil did not say. He didn’t say that an error in the default amount means there was no default. He said that “claims for money” in notices of default were wrong. That is not because of the amount, that is because the wrong party is making a claim for money. This assumes you were talking about #23 above…
  4. Ha ha.
  5. and i thought i was being polite by not saying lunatic fringe…
  7. Not a “loan”…a “line of credit”…get it through your thick heads…
    Not disclosed at origination…FRAUD.
  8. what a sad indictment of this site when anyone with a divergent opinion is a bankster shill and the fringe are the main commenting force. Pat has made some insightful comments whether you agree with him or not. and his points have led to what has been useful commentary. but those of us not in lockstep can simply fade away so you can have your self-serving bully pulpit
  9. Mark Stoppa Esq. to Foreclosure Judge Martha Cook : I’m concerned at your decision to continue presiding over mortgage foreclosure cases given your personal ties to the banking industries
    But first, some excerpts from his letter to Foreclosure Judge Martha Cook…
    Respectfully, I am concerned at your decision to continue presiding over mortgage foreclosure cases given your personal ties to the banking industry and that of your husband.
    1. Your husband is the Chairman and CEO of Community Bank of Manatee (and has been for quite some time);
    2. You have/had more than a 5% ownership interest in that bank;
    3. Your personal net worth decreased by nearly half in recent years, largely because of the near-failure of Community Bank.
    I find it eminently reasonable for my clients to fear their ability to get a fair hearing/trial before you, in foreclosure lawsuits, given your personal, financial ties to the banking industry.
  10. Looks to me like the bankster’s desperate propaganda shills are peddling their wares. The tsunami is rising and you are UNABLE to stem the tide. Good luck with that, SHILLS.
  11. tnharry,
    You are absolutely correct in your comments. Default is default per the Note and Deed.
    I have reviewed servicing records time and again. I have yet to find a loan that was not in default, though I have found unlawful charges. But the unlawful charges does not void the default.
    I have spoken with thousands of homeowners. I have never had one deny that they were behind in payments. They have said that they were not in default, but according to any note and deed, even the act of missing one payment is a technical default.
    In CA, under 2924, the foreclosure statutes, the Notice of Default must identify the amount owed, using the methodology in the statute. I have found the dollar amount to be in error often. But all this could do would be to force the servicer to rescind the Default Notice, and then correct the Notice and refile. So, it delays the foreclosure, but that is all.
    Even then with the amount wrong, a court is likely to ignore the finding. That is because one has determine if it has prejudiced the borrower. If that has not happened, then the perception is “no harm, no foul”. Take into consideration that the borrower has not made payments for at least three months, and usually much longer, then where is the harm?
    Some will say that this is wrong, not following the statute to the “tee”, but at the same time, the prejudice argument must certainly be considered. And, attorneys debate this every day among themselves, when determining what allegations to make. In fact, the attorneys that I deal with, we have this discussion on every new allegation to determine the usefulness of the allegation.
  12. 450,000 to split $108 mill? lets see, after attorneys fees thats means the borrowers owe the lawyers about $50 bucks each. big surprise there.
  13. Tony, as much as I hate to start something with you again, i must. Default is a defined term in the note, not a determination by a court or a standing issue or anything else. It’s a definition in the the note. Many readers and commenters on this site may in fact be in default, but there is no one coming forward with standing to pursue it. Default, standing, and this judicially settled concept you refer to are all different things. Whether some party can enforce their security interest based upon that default is a completely different discussion.
    And it’s easy to take my initial comment and twist it around to make your criticism work. But, if you’re in default, you’re in default – it doesn’t matter if it’s $14 or $14000 in terms of the validity of foreclosure. In non-judicial foreclosure, stating an exact amount in default isn’t even a requirement under some states’ laws.
  14. tnharry, thanks, Rich
  15. I’ll pile on 2nd:
    A default is not when someone say’s you missed a payment, but when it is judicially settled that the person making the claim has proved that they can make the claim and show there is a claim. Ever herd of adverse possession, or squatters, heck debt buying?
    Default is another word for your guilty and you admit it. Why you think people win on the standing real party in interest doctrine. If default meant how you are saying I am going down to court right now and say you tnharry is in default and you owe me 10k.
    So yes if the amount is wrong, then there is a question of doubt of who is this person, and you need not talk about monetize of the of the instrument. For if you know that they are off any money amount then if you investigate more they will be a lot off on many more things.
    See the real problem is monetize of instruments. Since banks and companies do this on a daily basis, they don’t know who is who and what is what. They don’t know the true amount of a claim because they purchased it in bulk transaction. In this kind of transaction it tells no amount except for 1 amount. The amount it started off with, not the amount you paid on it or what the amount is now. This is why the securitization problem is so huge. All these bulk transactions with no names mean no bank can say anything but: hey this is your name right? You live at this address right? Your last 4 digits of your social is this right? Well then your honor I rest my case tell them they’re in default and give me the house.
    When people were saying ok you win, everything was great, but when people started seeking knowledge THEMSELF instead of asking other people things went the other way. Now this new thing that isn’t new came into play called jurisdiction or standing. When it was shown you could put the puzzle together, they couldn’t even get to the word default.
    So be careful using this word default, it is a powerful word but you need to get there first.
  16. Rich – try clicking the link in the article. the blue words “The recipients under the settlement “
  17. my argument does presume validity of default. but a foreclosure, especially a nonjudicial one, isn’t analogous to a suit to collect money as you framed your response. my argument, and Neil’s introduction, both do assume default is valid. Neil makes a distinction that they can’t accurately identify the amount, and I think that’s a fallacy. if we admit there’s default, the amount is immaterial. and if the stated default (again assuming it’s valid and everything else is kosher, which are big assumptions) is $15 too much or too little, that simply doesn’t invalidate the foreclosure. again, just my opinion
  18. OK, I’ll pile on first…
    If, under oath, A sues B for failing to return a $14,000 “loan,” when the actual amount was $14 and it was not really owed to A, but was instead owed to undisclosed person C, why is the amount not relevant? Your argument also presumes the validity of default, when it absolutely matters which party is making that assertion.
  19. I disagree with Neil’s assertion that if the amounts in default were wrong, the whole foreclosure is invalid. In terms of default, being $14000 or $14 behind is still default. Now before all of you start to pile on, the other arguments about them conducting the sale and having standing to foreclose may still be germane to the discussion. But default is default. It either exists or not.
  20. How does one find out if one is due money from Countrywide/B of A due to these excessive charges?
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