Posted on July 20, 2011 by Neil Garfield
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.
- 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.
- 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.
- The money used was subject to a PSA and Assignment and Assumption Agreement that predated the application for loan.
- 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.
- 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.
- 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.
- The principal fact of any transaction is the actual obligation — not the documents providing evidence of the transaction.
- 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.
- 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.
- 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.
- 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.
- 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.
- The failure to disclose the actual obligee is a fatal defect in the note and mortgage.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- And it follows that the auction sale was improper and fraudulently obtained.
- 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.
- 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.
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor,Mortgage, securities fraud Tagged: | bankruptcy, borrower, countrywide, disclosure,foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, securitization, TILA audit, trustee
Be the first to like this post.
- Georgians getting refunds for Countrywide overcharges (ajc.com)
- FTC Returns Nearly $108 Million to 450,000 Homeowners Overcharged by Countrywide for Loan Servicing Fees (ftc.gov)
- FTC Mailing Refund Checks in Countrywide Settlement (blogs.wsj.com)
- FTC: Countrywide borrowers to get $108 million in refunds (money.cnn.com)
- Wells Fargo to pay $85M over mortgage abuses (content.usatoday.com)
- Refunds to go out in $108M Countrywide settlement (sfgate.com)
- FTC paying nearly $108M to Countrywide borrowers (seattletimes.nwsource.com)
- Harlan Green: Don't Blame Fannie and Freddie! (huffingtonpost.com)
- Abigail Field Finds Smoking Gun on BofA Securitization Fraud (news.firedoglake.com)
- IN THE WASHINGTON POST, JOHN TAYLOR REVIEWS Gretchen Morgenson & Joshua Rosner's Reckless Endangerme... (pajamasmedia.com)