Center for Public Integrity, a Washington-based watchdog group

The banks were “enablers that bankrolled the type of lending threatening the international financial system,” according to the study being released today by the Center for Public Integrity, a Washington-based watchdog group.

The center collected data on the top two dozen subprime lenders in an effort to paint a comprehensive picture of how each major player was linked to the banking system.

“What happened to our largest financial institutions was very much a self-inflicted wound,” said the center’s executive director, Bill Buzenberg. “These banks owned many of the subprime lenders and financed their lending in order to get bundles of mortgage-backed securities that they could sell, reaping enormous profits.”

The report noted that investment banks Lehman Bros., Merrill Lynch, J.P. Morgan and Citigroup “both owned and financed subprime lenders,” and that others, including Goldman Sachs & Co. and Swiss bank Credit Suisse First Boston, were major financial backers of subprime lenders.

Financial services industry officials called the analysis simplistic and stale.

Although it is well established that California was home to many of the companies at the leading edge of the subprime mortgage crisis, the study lays out the overwhelming role that the state’s financial institutions played in fueling the subprime boom.

Nine of the 10 largest originators of subprime loans were headquartered in the state, mostly in Orange County.

These high-interest-rate loans were typically made to borrowers with poor credit, often with no documentation of their income or assets. Those loans were bundled into securities sold to investors.

When home prices plunged and borrowers defaulted on their loans, these securities became the “toxic assets” clogging credit markets.

The big subprime lenders included Countrywide Financial Corp., Ameriquest Mortgage Co., New Century Financial Corp. and Long Beach Mortgage Co.

The industry blossomed in California, in part because of the state’s once-booming real estate market and also because the mortgage business was poorly regulated in the state, analysts say.

Sample Pleading

SUPERIOR COURT OF THE STATE OF CALIFORNIA.

COUNTY OF LOS ANGELES

  

PLAINTIFF,

    V.

COUNTRYWIDE FINANCIAL, BANK OF AMERICA (NOMINAL DEFENDANT),INTUIT., INC,, D/B/A QUICKEN LOANS, CORNERSTONE APPRAISAL SERVICES, TSI APPRAISAL SERVICES, ROSA REYES,

FIRST AMERICAN TITLE INSURANCE CORPORATION AS TITLE AGENT, CLOSING AGENT TITLE INSURANCE CARRIER AND NOMINAL TRUSTEE ON DEED OF TRUST, CHRISTINE S QUINTERO MORTGAGE ELECTRONIC REGISTRATION SYSTEMS,INC.(MERS)CREDCO REPORTING SERVICESJOHN OR JANE DOES 1-1000, UNKNOWN INVESTORS JOHN ROES 1-10, BEING UNDISCLOSED MORTGAGE AGGREGATORS(WHOLESALERS), MORTGAGE ORIGINATORS, LOAN SELLER, TRUSTEE OF POOLED ASSETS,TRUSTEE FOR HOLDERS OF CERTIFCATES OF OLLATERALIZED MORTGAGE OBLIGATIONS, MORGAN STANLEY, AS INVESTMENT BANKER,ET AL,INDIVIDUALLY, JOINTLY AND SEVERALLY

   

 DEFENDANTS

   ________________________________________________________________/

   

    CASE NO: _______

 

 

NATURE OF THE ACTION

1. This case arises out of Defendants’ egregious and ongoing and far reaching methods and schemes for improper use of Plaintiff’s identity, negligent and/or intentional misrepresentation of appraised fair market value upon which Plaintiff was contractually bound to rely and factually entitled to rely, fraud in the inducement, fraud in the execution, usury, and breaches of contractual and fiduciary obligations as Mortgagee or “Trustee” on the

Deed of Trust, “Mortgage Brokers,” “Loan Originators,” “Loan Seller”, ”Mortgage Aggregator,” “Trustee of Pooled Assets”, “Trustee or officers of Structured Investment Vehicle”, “Investment Banker”, “Trustee of Special Purpose Vehicle/Issuer of Certificates of ‘Asset-backed Certificates’”, “Seller of ‘Asset-Backed’ Certificates (shares or bonds),” “Special Servicer” and Trustee, respectively, of certain mortgage loans pooled together in a

Trust fund. 

 

2. The participants in the securitization scheme described herein have devised business plans to reap millions of dollars in profits at the expense of Plaintiff and other investors in certain trust funds.

                              Summary of Facts

The media attention and recent press surrounding foreclosures in America identify the tragic affects of the foreclosure crisis on homeowners. The situation is somewhat absent a precise definition for cause and assuring homeowners of an ethical recovery and day in court where thy can be heard.

 

of no cover-up or fraudulent activity. Wall Street is sharing the blame at the moment for the debacle causing many Americans to unfairly lose their homes.

A mortgage-backed security or MBS is an asset-backed security or debt obligation “Stock” that represents a claim on the cash flows from mortgage loans used to make loans on residential property. First, mortgage loans are purchased from banks, mortgage companies, and other originators. Then, these loans are assembled into pools. This is done by government agencies and private entities. Mortgage-backed securities represent claims on the principal and payments on the loans in the pool, through a process known as Securitization. These securities are usually sold as bonds, but financial innovation has created a variety of securities that derive their ultimate value from mortgage pools.

 

Most MBSs are issued by a U.S. government agency, or the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), U.S. government-sponsored enterprises. The U.S. government, guarantees that investors receive timely payments. Fannie Mae and Freddie Mac provide certain guarantees and, while not backed by the full faith and credit of the U.S. government, have special authority to borrow from the U.S. Treasury.

 

Securitization is a structured finance process that involves pooling and repackaging of cash-flow-producing financial assets into securities, which are then sold to investors. Pooling is a resource management term that refers to the grouping together of resources (assets, equipment, effort, etc.) for the purposes of maximizing advantage and/or minimizing risk to the users. The term is used in many disciplines.The term “securitization” is derived from the fact that the form of financial instruments used to obtain funds from the investors are securities. As a portfolio risk backed by amortizing cash flows – and unlike general corporate debt – the credit quality of securitized debt is non-stationary due to changes in volatility that are time- and structure-dependent. If the transaction is properly structured and the pool performs as expected, the credit risk of all tranches of structured debt improves; if improperly structured, the affected tranches will experience dramatic credit deterioration and loss.^[1] All assets can be securitized so long as they are associated with cash flow. Hence, the securities which are the outcome of securitization processes are termed asset-backed securities (ABS). From this perspective, securitization could also be defined as a financial process leading to an issue of an ABS.Some private institutions, such as brokerage firms, banks, and homebuilders, also securitize mortgages, known as “private-label” mortgage securities.

 

Residential mortgages in the United States have the option to pay more than the required monthly payment (curtailment) or to pay off the loan in its entirety (prepayment). Because curtailment and prepayment affect the remaining loan principal, the monthly cash flow of an MBS is not known in advance, and therefore presents an additional risk to MBS investors.

 

An asset-backed security is a security whose value and income payments are derived from and collateralized (or “backed”) by a specified pool of underlying assets. The pool of assets is typically a group of small and illiquid assets that are unable to be sold individually. Pooling the assets into financial instruments allows them to be sold to general investors, a process called securitization, and allows the risk of investing in the underlying assets to be diversified because each security will represent a fraction of the total value of the diverse pool of underlying assets. The pools of underlying assets can include common payments from credit cards, auto loans, and mortgage loans, to esoteric cash flows from aircraft leases, royalty payments and movie revenues.

 

Often a separate institution, called a special purpose vehicle, is created to handle the securitization of asset backed securities. The special purpose vehicle, which creates and sells the securities, uses the proceeds of the sale to pay back the bank that created, or originated, the underlying assets. The special purpose vehicle is responsible for “bundling” the underlying assets into a specified pool that will fit the risk preferences and other needs of investors who might want to buy the securities, for managing credit risk—often by transferring it to an insurance company after paying a premium—and for distributing payments from the securities.

 

As long as the credit risk of the underlying assets is transferred to another institution, the originating bank removes the value of the underlying assets from its balance sheet and receives cash in return as the asset backed securities are sold, a transaction which can improve its credit rating and reduce the amount of capital that it needs. In this case, a credit rating of the asset backed securities would be based only on the assets and liabilities of the special purpose vehicle, and this rating could be higher than if the originating bank issued the securities because the risk of the asset backed securities would no longer be associated with other risks that the originating bank might bear.

 

A higher credit rating could allow the special purpose vehicle and, by extension, the originating institution to pay a lower interest rate (that is, charge a higher price) on the asset-backed securities than if the originating institution borrowed funds or issued bonds.

 

Thus, one incentive for banks to create securitized assets is to remove risky assets from their balance sheet by having another institution assume the credit risk, so that they (the banks) receive cash in return. This allows banks to invest more of their capital in new loans or other assets and possibly have a lower capital requirement.

 

When the secretary Bernanke responded to the crisis in late fall it was alleged the banking system and sub prime borrowers were in need of a serious solution to an ever deteriorating financial situation. We saw the tax payer relief extended to the banks and bailout of Indymac and WaMu. But, the questions still remains unanswered. What about the consumer homeowner?

 

Now, there is word of a fraud and more fraud gathering while a select group of experts takes an extraordinary view with respect to the government, the foreclosure crisis and the problems facing delinquent homeowners. Analyst and industry veteran Maher Soliman publishes an insightful and controversial consumer assistance foreclosure web page known as Foreclsureinfosearch.com. He is not alone in his aggressive views which are more accounting based allegations versus legally based claims. Soliman cites a recent PBS special interview with Bill Moyers featuring David Black, a Missouri University professor and business fraud hardliner. It was a very disturbing piece (PBS broadcast) of newsworthy subject matter suggesting mass fraud and government covers up. The American homeowners are no doubt impacted by the potential for wide scale deceitful and fraudulent acts taken by the lenders in a foreclosure does exist.

Soliman’s take on the problem affecting homeowners in America facing foreclosure is hard to believe but compelling none the less. The entire lending industry could be pulling off a unimaginable second act to the mortgage mess of 2002 through 2007. The PBS interview and story was featured back in April 2009 pointed to blatant fraud and white collar criminal acts. What s even more concerning is the potential for government mandated programs offering consumer’s assistance becoming unveiled as a hoax. Imagine the new administrations “Troubled Asset Relief Program” being labeled a farce and never intended to be a factor in this problematic recovery effort.

 

Consumers must remain alert to undeliverable promises and should carefully reconsider why current government economic assistance is perhaps misleading homeowners into a false rationale for saving their homes.

 

Much regard had been made by legal pendants regarding a controversial firm called MERS! Mortgage Electronic Registry Services MERS is part of the Wall Street “insulation” or Wall that puzzles business pragmatists. Mortgage Electronic Registration Systems (MERS) is a privately-held company that controls a confidential electronic registry to track mortgages and the changes in servicing rights and ownership of mortgage loans in the United States.^[1] MERS serves as the mortgagee for lenders, investors and their loan servicers in the county land records.^[2] This eliminates the need to file assignments in the county land records which lowers costs for lenders and consumers by reducing county recording revenues from real estate transfers ^[3] and provides a central source of information and tracking for mortgage loans.^[4] MERS helped make mortgage-backed securities possible and helped to also facilitate the United States housing bubble. [1]

 

A cooperative business entity owned amongst all lenders has the ability and right to transfer at will the lenders beneficial interest in your home. That is significant for a number of reasons. So are the arguments for a lender delaying or missing an assignment (of the loan to a successor) or for a delayed substitution of trustee, foreclosure specialist assigned the rights of the beneficiary. I believe judges across America agree and subscribe to this notion of nothing for free.

 

Borrower claims against lenders for errors and omissions or Wall Street negligence are typically lacking a basis for arguments and perhaps are less than sound to determine standing in court. By standing we refer to grounds for bringing an action and knowing what the appropriate remedy is giving the circumstances.

 

Filing an action is California for instance presumes state regulatory authority over foreclosures and jurisdiction to argue locally federally enforceable violations. Judges are none the less quick to latch onto the notion of equitable distribution. Under any circumstances the matter of a foreclosure gone wrong is something that must balance out with the consideration received by parties, the lender and borrower. Something for nothings does not exist in most courts and judges minds. the real property domicile is local to the county the home resides and is likely a personal residence, a second home or investment property. What is interesting though is where the collective parties thought to be the beneficiary and defense lawyers are moving the matter of lender fraud or wrongful foreclosure claim away from state jurisdiction and into federal court.  According to Soliman “Yes, the lenders defense against a borrower claim of unlawful foreclosure has apparent advantages in district court. The legal appeal for attorneys who argue the matter might be from a regulatory perspective and claim of prioritizing potential compliance conflicts at a state level with guidance from the OTS and FDIC regulatory authority that falls in line with a Federal Savings Bank. Banks are required to be issued with a bank license by the regulator in order to carry on business as a bank, and the regulator supervises licensed banks for compliance with their own requirements often outside of State guidelines.

 

Market discipline is a function of the federal regulators as is RESPA and TILA under the OCC. Guidance from the OTS and FDIC regulatory authority that falls in line with a Federal Savings Bank is far more weighted on fiscal compliance versus exposure to borrower claims of negligence. Everything seems to be accounting and reporting driven where federal regulators are quick to respond to breach accusations from a lending practices and capital reserve perceptive. Therein are federally imposed requirements for business undertakings, giving directions, imposing penalties or revoking a license. The regulator requires banks to publicly disclose financial and other information, and depositors and other creditors are able to use this information to assess the level of risk and to make investment decisions. As a result of this, the bank is subject to market discipline and the regulator can also use market pricing information as an indicator of the bank’s financial health.

 

Regardless of the arguments made and to which venue the matter is heard the question comes back again as to the maker of the note and lender under a contractual understanding. Did the borrowers receive appropriate consideration in exchange for allowing a security interest to record against their home? Consider the arguments still being made to date:

a) MERS role in the process

b) The lost note theory

c) Allowing borrowers up to a year while in default

d) Lender alias’s e.g. “Our workout division”, “Home retention”, “office of the president”.

e) No meaningful workouts to date out of thousands of loans.

Under Generally Accepted Accounting Rules and FAS / FAS 140-3 you will find Accounting for Transfers of Financial Assets and Repurchase Financing Transaction. It specifically addresses the situations where the regional transferee subsequently transfers the financial assets back to the original transferee as collateral for a borrowing arrangement under a repurchase arrangement. The issue is the violation centered on surrender of control criterion of FAS 140 obviating the ability of the original transferor to record the transfer as a sale.  that this all means is there is likelihood for de-recognition under generally accepted accounting principals where wall street and a Federal Savings Bank is making loans to consumers as secured borrowing. Again, if the transferor or “FSB” Federal Savings Bank,  maintains effective control, the transfer is accounted for as secured borrowing and not a sale.

 

Therefore, using these arguments assume the following:

 

1)   Mortgage Electronic Registry Services or “MERS” is a nominee and symbolic or metaphorical transferor that does not deliver its goods till the hour before sale. That sale is a Trustee or sheriff’s sale. A nominee by definition allows for anonymity of a large shareholder or off shore purchaser or in this case, the holder in due course. It is a critical securities issuance function in a registration under the SEC and where the true beneficiary is being sheltered from regulatory scrutiny – and that beneficiary and holder in due course is the FSB.

 

2)   The lost note is absent to the true holder in due course the FSB.

3)   Lenders will finance delinquencies to 12 months by making payments to the master servicers who is allowed and required to do so – but only after repurchase!

4)   It is allowed to “after repurchase” – not in order to avoid the repurchase requirement after 60 days.

5)   Lenders cannot control a recovery and disposition of assets so they form a separate entity such as Home retention centers.

6)   There cannot be a work out – ever. If there is even one workout the trust will fall apart and lose all the tax incentives and violate SEC registration requirements.

 

Recently uncovered 10 K filings have offered disturbing information to support eh allegations of a cover-up. Nationwide Loan Services has turned up attestation reports by the likes of Price Water house and other big four accounting firms. They acknowledge the lenders are in violation of multiple criterions under commission guidance for 1122 AB. If the transferor maintains effective control, the transfer is accounted for as secured borrowing and not a sale.

 

 

 

 

,            Plaintiff,      vs. ,            Defendant

) ) ) ) ) ) ) ) ) )

Case No.:

 

 

 

 

Dated this  

___________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Letter Sample for Complaint re: FAS 140

July 6, 2009

Re: Loan 6648793

Dear Counsel

You can imagine the dilemma for Mortgage Back Investments and Trust funds should claims these loans held for sale are subject to FAS 140-3 and guidelines that may enforce derecognition. Our research into this matter suggests the loans were never really transferred as represented. The transfer fails where the FSB never relinquished control of the asset loans carried as a loan held for sale.

Wrongful lender servicer actions intended to deceive a borrower are verifiable under the commission’s guidance and rule 1122 AB.  Questions exist as to AM Trust and industry wide allegations of deceptive business dealings by you and other lenders.

Our concern is a lack of transparency while a Trust has failed to act in good faith. The parties lack joinder as a collective lender, including the real holder in due course and all successor and assigns. The parties rely on the mortgage pass-through securities structure for origination commitments and regulatory compliance for high risk obligations that put a federal insured institution at risk.

The originator and Trust Fund, Trustee and Master Servicer appear in a fog as to the conduct of the Sub Servicer, securities platform sponsors and key management. No one in our view is insulated however, from your reporting responsibility including accountants and the attorney’s handling the disposition effort against consumers such as myself. These unlawful business practices fall under SEC criterion for using questionable servicing practices to accomplish a foreclosure in lieu of offering a meaningful workout to borrowers’ such as myself.

The new administrations Troubled Asset Relief Program is a made to be mockery as evidenced by your efforts and deceptive practices. Please provide me with your best offer no later than July 20^th to avoid a costly action against your firm.  I would entertain cash for keys after sale in lieu of the meaningful workout and modification I was promised and never received.

Respectfully

 

 

Jasmina Subasic

 

Cc: File

Samantha Joseph /Senior Counsel /

AM Trust 1111 Chester Avenue Cleveland Ohio 44114

The Report on Assessment prepared by GMACM

GMAC Mortgage, LLC: The Report on Assessment prepared by GMACM and the related Attestation Report have identified material noncompliance with two elements of one servicing criterion applicable to it. Specifically, with regard to servicing criterion 1122(d)(2)(vii), which contemplates that reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts –

 

•

certain custodial account reconciliations were not reviewed within the timelines outlined in GMACM’s policies and procedures, as contemplated by criterion 1122(d)(2)(vii)(C); and

 

•

certain custodial accounts had reconciling items which were not resolved within 90 calendar days of original identification, as contemplated by criterion 1122(d)(2)(vii)(D).

The registrant does not believe these instances of noncompliance had material impacts or effects on investors, and appropriate measures have been taken to resolve the bank reconciliation items noted in the Report on Assessment, and to prevent such instances of noncompliance in the future or to detect them in such a manner as to permit prompt correction.

Homecomings Financial, LLC: The Report on Assessment prepared by Homecomings and the related Attestation Report have identified material noncompliance with one servicing criterion applicable to it. Specifically, with regard to servicing criterion 1122(d)(4)(x)(C), certain refunds resulting from payoff transactions were not returned to the obligor within 30 calendar days of full repayment of the related pool asset, as contemplated by such criterion. The registrant does not believe these instances of noncompliance had material impacts or effects on investors, and appropriate measures have been taken to prevent such instances of noncompliance in the future or to detect them in such a manner as to permit prompt correction.

Litton Loan Servicing LP: The Report on Assessment prepared by Litton Loan Servicing LP (“Litton”) and the related Attestation Report have identified material instances of noncompliance with three servicing criteria applicable to it. Specifically –

 

•

With regard to servicing criterion 1122(d)(2)(vii), which contemplates that reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, Litton’s investor bank account reconciliations included certain reconciling items that were not resolved within 90 calendar days of their original identification.

 

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•

With regard to servicing criterion 1122(d)(4)(iii), which contemplates that additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with the terms of the transaction agreements, Litton indicates that certain loan buyouts from pool assets were not made within timeframes established in the transaction agreements.

 

•

With regard to servicing criterion 1122(d)(4)(vi), which contemplates that changes with respect to the terms or status of an obligor’s pool asset are made, reviewed and approved by authorized personnel in accordance with the terms of the transaction agreements and related pool asset documentation, Litton indicates that certain loans were modified during the 2007 calendar year that included a modified maturity date that exceeded the latest maturity date established in the transaction agreements.

With regard to investor bank account reconciliations, Litton indicates that its controls over the investor bank account reconciliation process are adequately designed and operating effectively and that, in the fourth quarter of 2007, it reduced the number of investor bank account reconciliations which included reconciling items that were not resolved within 90 calendar days of their original identification to less than 4%.

Litton also indicates that its key monitoring controls include an account reconciliation status report, and a key performance indicator report which monitors bank account reconciliation timeliness, and the percentage of accounts which have 90-day reconciling items. Litton also indicates that senior servicing management review both of these monitoring reports monthly.

With regard to loan buyouts from pool assets, Litton indicates that it is in the process of incorporating automation that will calculate the calendar month in which a loan can be bought out of individual securities transactions based on the requirements in the respective transaction agreements, and that this automation will not allow a loan to be removed from a transaction unless it is in the timeframe allowed in the respective transaction agreements. Litton indicates that it expects to have this automation in place soon.

With regard to loan modifications, Litton indicates that, in February 2008, it reviewed all of its transaction agreements and updated its monitoring software with the latest maturity date to which a loan may be modified for each transaction, and that this software is designed to prohibit loss mitigation personnel from modifying a loan with a maturity date past the maturity date maintained in the system.

We have not independently verified the accuracy of Litton’s assertions concerning these instances of noncompliance or the adequacy of its remediation efforts.

LaSalle Bank National Association: The Report on Assessment prepared by LaSalle and attached to this Report on Form 10-K describes in Appendix B thereto the following material instance of noncompliance related to investor reporting:

 

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“1122(d)(3)(i)(A) and (B) – During the [r]eporting [p]eriod, certain monthly investor or remittance reports were not prepared in accordance with the terms set forth in the transaction agreements and certain investor reports did not provide the information calculated in accordance with the terms specified in the transaction agreements for which certain individual errors may or may not have been material.”

According to LaSalle, the investor reporting errors identified in its Report on Assessment as material instances of noncompliance included, for example, revised delinquency, REO, foreclosure, repurchase, payoff or modified loan counts, category indicators and/or balances. LaSalle indicates that the conclusion that these investor reporting errors amounted to a material instance of noncompliance was based primarily on the aggregate number of errors as opposed to the materiality of any one error.

LaSalle also indicates that these investor reporting errors were generally caused by human error resulting primarily from high volume monthly data processing demands that had to be addressed within constricted time frames with less than a full complement of operational staff. Between the fourth quarter of 2007 and the date of its Report on Assessment, LaSalle indicates that it has employed additional operational staff to accommodate the high volume of monthly investor reporting requirements and minimize the risk of the investor reporting errors recurring. LaSalle also indicates that other necessary controls are in place to minimize the risk of such errors.

We have not independently verified the accuracy of LaSalle’s assertions concerning these investor reporting errors or the adequacy of its remediation efforts.

Platform-Level Reports

Regulations of the Securities and Exchange Commission (the “SEC”) require that each Servicing Participant complete a Report on Assessment at a “platform” level, meaning that the transactions covered by the Report on Assessment should include all asset-backed securities transactions involving such Servicing Participant that are backed by the same asset type. Further guidance from the SEC staff identifies additional parameters which a Servicing Participant may apply to define and further limit its platform. For example, a Servicing Participant may define its platform to include only transactions that were completed on or after January 1, 2006 and that were registered with the SEC pursuant to the Securities Act of 1933. Each Servicing Participant is responsible for defining its own platform, and each platform will naturally differ based on various factors, including the Servicing Participant’s business model, the transactions in which it is involved and the range of activities performed in those transactions.

Based on our understanding of their platforms and the guidance that is available at this time, we believe that the parameters by which the Servicing Participants have defined their platforms should be permissible. However, because the SEC’s regulations are new and the guidance that is available at this time is subject to clarification or change, we cannot assure you that the SEC and its staff will necessarily agree.

 

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Item 1123 of Regulation AB: Servicer Compliance Statement.

Each of Residential Funding, GMACM, Homecomings and Litton Loan Servicing LP (each, a “Servicer”) has been identified by the registrant as a servicer with respect to the pool assets held by the Issuing Entity. Each Servicer has provided a statement of compliance with its obligations under the servicing agreement applicable to such Servicer (a “Compliance Statement”) for the portion of the period covered by this Form 10-K during which such Servicer was servicing the pool assets, in each case signed by an authorized officer of such Servicer. Each Compliance Statement is attached as an exhibit to this Form 10-K. None of the Compliance Statements has identified any instance where the related Servicer has failed to fulfill its obligations under the applicable servicing agreement in any material respects.

Foreclosures stymie efforts to revive economy

MSNBC.com

Whittled-down housing bill leaves loan decisions up to banks, investors
By John W. Schoen
Senior producer
updated 7:36 a.m. PT, Thurs., May 21, 2009
More than two years year after the housing market tanked and the foreclosure rate began rising, the ongoing wave of distressed home sales is weighing on house prices and crimping a long-awaited economic recovery.

On Wednesday, President Obama signed off on the government’s latest response to the crisis, a whittled-down bill aimed at helping millions of struggling borrowers keep their homes. But the latest effort may not be strong enough to reverse the downward spiral that has gripped the housing market and the economy.

After months of debate, the final version of the latest bill eliminated a key provision that would have allowed bankruptcy judges to modify mortgage terms. Faced with heavy pressure from the banking industry, Congress again tabled the highly contentious provision after several attempts to introduce it over the past year. That leaves the decision to refinance a mortgage up to lenders and investors holding securities backed by those loans.

Meanwhile, homeowners stuck with unaffordable payments, or who now owe more than their house is worth, must slog through the red tape of negotiating a new loan with their lender.

Courtney Scott, 60, a retired nurse living in Atlanta, has been trying for over a year to get her loan modified.

“This has just been round and round,” she said. “Every time we do what they say they need us to do, something happens where we need to resubmit it or they say there’s a backlog and it’s going to take more time.”

That backlog is growing as the pace of foreclosures rise. They’re up 32 percent in April from a year ago, according to the real estate data firm RealtyTrac. Some 2.4 million new home foreclosures are expected this year, according to the Center on Responsible Lending. Nearly one in five homeowners is already “underwater” — owing more on their mortgage than their home is worth, according Moody’s. While pace of job losses has begun to slow, unemployment is still headed higher.

“You mix all of that together, and the foreclosure problem is getting worse not better,” said Mark Zandi, chief economist at Moody’s Economy.com. “We’re counting on the president’s loan modification plan to really kick in here. But it hasn’t yet, and we need to see it.”

Meanwhile, the rise in foreclosures is tearing a hole in the household budgets of those that lose their homes and those who live next door. As homes are sold off at distressed prices, the value of neighboring homes also drops.

Though home sales have perked up this spring, in some markets as many as half of those are distressed sales to new home buyers and investors looking for bargains.

“We need the foreclosure supply to start slowing down,” said Susan Wachter, a real estate professor at the Wharton School of Business. “As we get more homes through the foreclosure process, housing prices continue to fall.”

The government’s foreclosure relief effort is beginning to show signs of progress. The Making Home Affordable program, for example, gives cash incentives to lenders who provide foreclosure relief. In the first two months, some 55,000 homeowners were offered more affordable terms, according to the Treasury.

“We’re encouraged but we are not by any stretch convinced,” said John Taylor, president of the National Community Reinvestment Coalition, which has been working with Congress on various foreclosure relief proposals.

Since the foreclosure rate began rising in the middle of 2006, the government has made several attempts to slow the ongoing erosion of homeownership. In October 2007, the Bush administration launched the Hope Now Alliance, a public-private partnership designed to encourage lenders to rewrite loan terms to make payments more affordable.

Though the group says nearly a million mortgages were reworked, many of those “workouts” simply added missed payments to the outstanding principal, raised the monthly payment and made the new loan even less afforadble. As a result, more than half of homeowners who got help defaulted on their new loans in less than a year.

The latest effort centers on providing incentives to loan servicers — the companies who collect payments from homeowners on behalf of investors who jointly own the mortgage — to provide more affordable terms. The Making Home Affordable program, for example, offers incentives to lenders who lower monthly payments by either reducing the interest rate or stretching out the term to 40 years. The program applies to loans issued or sold to investors through Freddie Mac or Fannie Mae and the Treasury estimates it could help as many as five million homeowners.

The latest foreclosure bill expands on that effort and provides further help for lenders who offer troubled homeowners more affordable loans. One key provision protects servicers from lawsuits by investors holding bonds backed by loans that are modified. In many cases, lower mortgage payments bring lower returns for those investors; servicers say that has stymied past efforts to modify loans.

Another provision overhauls the Hope for Homeowners program. Introduced last summer, the program was intended to help some 400,000 borrowers. But high fees and tight credit left all but a handful of homeowners with new loans and lower monthly payments.

Foreclosure relief efforts have also been hampered as servicing companies have been overwhelmed by calls from homeowners seeking help. Originally hired to collect payments and forward them to investors, servicers say they aren’t set up to handle the historic wave of defaults created by the housing market collapse. Cash incentives for loan modifications are designed to help defray those costs. But many servicers remain badly understaffed.

“You talk to a machine, talk to someone in a foreign country,” said Taylor. “More often than not you never get the same person. So you’re constantly starting from scratch. I do think there is an industry infrastructure problem.”

Scott’s attempt to modify her loan typifies the process. When she bought her Atlanta-area home two years ago, she applied for an FHA mortgage through a state-sponsored program. Bank of America approved her application for a $65,000 loan — about half the home’s current value — but the payments are consuming nearly 70 percent of her fixed income, she said.

After contacting the bank in March, 2008, she was told there was nothing the bank could do until she was behind in her payments, she said. So she stopped paying. After she recently began working with a HUD-approved credit counselor, she said the bank told her she had to make up two of those missed payments before they would talk to her. Two months ago, the counselor helped Scott apply for a loan modification, but the bank has not yet assigned someone to her case.

“They lost the paper work and asked that it be resubmitted,” she said. “So then we had to start from scratch, resubmitting all the documents.”

A Bank of America representative said the company does not comment on individual customers’ financial details but that it is reviewing Scott’s case.

Like other lenders who are participating in the government foreclosure relief programs, Bank of American also faces a hurdle when it tries to modify loans that aren’t held in its portfolio or were packaged and sold to investors outside of Fannie Mae and Freddie Mac.

Because those mortgages were pooled and sold off to hundreds of investors — each of which have varying financial interests in the loan pool — modifying those mortgages means getting those investors to sign off on the loan. Loan servicers say they’ve been hampered in their efforts to provide more affordable terms because of the threat of lawsuits from investors who might get a lower return on the new loan.

To help break that logjam, the foreclosure relief bill includes a so-called “safe harbor” provision that would shield lenders and servicers from lawsuits if they follow government guidelines when modifying loans.

© 2009 msnbc.com Reprints
URL: http://www.msnbc.msn.com/id/30854314/ns/business-eye_on_the_economy/

© 2009 MSNBC.com

Jobless consumers will hold back recovery

MSNBC.com

Though forecasters see growth ahead, it’ll still feel like recession to many

By John W. Schoen

Senior producer

updated 1:54 p.m. PT, Thurs., July 2, 2009

Call it the un-recovery.

Many forecasters expect the U.S. economy to begin growing later this year, but it probably won’t feel like a comeback for most people.

With home prices still falling and one in ten workers without a paycheck, the consumer spending that drives growth likely will remain weak for a lot longer.

Over the past few months, key sectors of the economy — from housing to autos — have shown signs of bottoming out. Housing starts posted a surprisingly strong 17 percent jump in May. This week, a closely-watched index of industrial supply managers provided more evidence that a steep slide in manufacturing may be easing. And the steep, long decline in auto sales showed signs of leveling off in June; Ford even reported the smallest decline in a year.

“I think on the auto side we can count on a snap back in terms of GDP simply based on the fact that GM and Chrysler were essentially shut down in the second quarter,” said Robert Barbera, chief economist at ITG, an investment technology firm. “You had an enormous drag on GDP as a consequence.”

But building more houses and making more cars alone won’t get the economy back on its feet. For that to happen people have to start buying again.

So far that isn’t happening. That’s one reason unsold inventories remain at the highest level since the last recession. Until consumers get back to a more solid financial footing, it’s going to be hard to generate enough demand for the economy to begin creating new jobs again.

“Once we get into the early part of next year, into early 2010, the economy will be out of recession,” said Mark Zandi, chief economist at Moody’s Economy.com. “It will be growing but it will still be really fragile, quite weak.”

The government jobs report for June Thursday pointed to a continued slowdown in the wave of layoffs that has sidelined more than six million workers since the recession began in Dec., 2007. Once that pace of layoffs eases and the unemployment rate peaks, consumers may get back into a spending mood, according to Merrill Lynch economist Drew Matus.

“Our expectation is that unemployment is only going to move up another percentage point from now,” he said. “You’re probably pretty confident you’re going to have your job going forward. That means the precautionary level of savings growth in the economy is going to be slightly slower for a period of time.”

Nevertheless, President Barack Obama is still worried. He told The Associated Press in an interview Thursday after the Labor Department reported the jobless rate hit 9.5 percent in June — a 26-year high — he was “deeply concerned” about unemployment and that many families were fretting they would be next to lose their source of income.

Once the job losses stop, there will still be tens of millions of people who have either given up looking for work or who can’t find enough work to make a full-time paycheck. Though the “headline” unemployment rate bumped up a tenth of a point in June, the wider measure that includes discouraged and underemployment workers hit 16.5 percent.

Those high levels of unemployment are expected to linger well after the economy officially starts growing again. Even after demand picks up, companies coming out of a recession typically hold off on hiring until they’re convinced the rebound is strong and sustainable.

 

Consumer spending still accounts for two thirds of the U.S. economy. But much of that spending over the past two decades was funded by the seemingly relentless rise in stock and house prices. Most forecasters warn that those two sources of spending power are not likely to return anytime soon.

With home prices still falling and retirement accounts in tatters, many consumers have begun trying to rebuild the trillions of dollars in savings that were destroyed by the collapse of the housing bubble and fall in stock prices. Even as consumers have sharply increased savings, paychecks have remained flat — for those who still have them.

“You have people out of work but you’ve got consumers that are working, not making much in terms of raises,” said Bill Gross, a money manager at the bond fund PIMCO. “You’ve got them raising their savings rate from zero percent to what we think is ultimately 8 to 10 percent. And you’ve got a problem of creditworthiness in terms of those that want to borrow. So you put those together and you have a consumer problem, not just now, not in 2010, but in 2011 and 2012.”

 

Consumer spending has held up relatively well so far this year. But economists say that’s largely due to the government’s massive stimulus program, which has helped ease the crunch on households with tax cuts and direct spending. The impact of that stimulus will likely begin to fade by next year.

So will the impact of unemployment benefits that, though they’ve been extended for many jobless workers, will begin expiring for millions of workers laid off in the early stages of the recession. As of June, some 4.4 million people, or nearly a third of all unemployed workers, had been out of a job for 27 weeks or more.

The boost in stimulus spending has created new government jobs at the federal level. But that’s being offset by deep spending cuts at the state and local level, where governments can’t borrow to make up for the sharp drop in tax revenues. Because property tax assessments typically lag housing market prices by several years, local spending cuts will likely continue even after the economy begins growing again.

“The federal government may be hiring employees, but state and local are certainly under pressure to cut employment,” said Joel Prakken, Chairman of Macroeconomic Advisers, which compiles the monthly ADP survey of company payrolls “It wouldn’t surprise me in the next several months no net change in government employment.”

 

Though California faces the most serious financial crisis, it is not alone. Severe budget pressure has forced cutbacks in all but two states, according to the Center on Budget and Policy Priorities. Those shortfalls have totaled $166 billion, or 24 percent of state budgets, and the latest data show that a majority of states expect shortfalls in 2011 that could top $350 billion, according to the CBPP.

 

Consumer spending will also likely take a hit as the baby boom generation, which lost trillions of dollars of retirement savings in the collapse of housing and stock markets since September,  approaches retirement age.

Retirees typically live more frugally than they did during their working careers; they don’t create the same demand for new housing, for example, that younger families do. Many of those who have managed to save enough to stop working have had to scale back their retirement spending plans to fit a smaller nest egg.

Others are now faced with a starker retirement plan that includes working longer than they originally planned. That will create added demand for jobs already in short supply for the tens of millions of workers laid off during the recession.

 

© 2009 msnbc.com Reprints

URL: http://www.msnbc.msn.com/id/31709420/ns/business-eye_on_the_economy/

© 2009 MSNBC.com

HSBC The Lender

THE BANK

 

The Bank is a federally chartered and federally insured stock savings bank which, at December 31, 2007, was conducting business from 288 full-service offices, including 54 grocery store banking centers, and over 1,000 automated teller machines in Maryland, Virginia, Delaware and the District of Columbia. The Bank’s home office is located in McLean, Virginia and its executive offices are located in Bethesda, Maryland, both suburban communities of Washington, DC. The Bank either directly or through a wholly-owned subsidiary also maintains two commercial loan production offices located in Baltimore, Maryland and Northern Virginia and nine mortgage loan production offices in the mid-Atlantic region. At December 31, 2007, the Bank had total assets of $15.3 billion, total deposits of $11.1 billion and total stockholders’ equity of $826.7 million. Based on total assets at December 31, 2007, the Bank is the largest full-service bank headquartered in the Washington, DC metropolitan area.

 The Company is a subsidiary of the Bank and, therefore, federal regulatory authorities have the right to examine the Company and its activities. Payment of dividends on the Series A Preferred Shares could be subject to regulatory limitations if after the payment the Bank was not “well capitalized” under OTS regulations. See “Risk Factors – Our ability to pay dividends could be affected by regulatory restrictions on our operations.”

 THE ADVISOR

 In 1996, the Company entered into an advisory agreement (the “Advisory Agreement”) with the Bank (the “Advisor”) to administer the day-to-day operations of the Company. The Advisor is principally responsible for: (i) monitoring the credit quality of the Mortgage Assets held by the Company, (ii) advising the Company with respect to the acquisition, management and financing of the Company’s Mortgage Assets, and (iii) maintaining the custody of the documents related to the Company’s Mortgage Loans. The Advisor may from time to time subcontract all or a portion of its obligations under the Advisory Agreement to one or more of its affiliates involved in the business of managing Mortgage Assets.

 The Advisor and its affiliates have substantial experience in the mortgage lending industry, both in the origination and in the servicing of mortgage loans. At December 31, 2007, the Advisor and its affiliates owned approximately $8.3 billion of residential mortgage loans, including all of the Company’s Residential Mortgage Loans. In their residential mortgage loan business, the Advisor and its affiliates originate and purchase residential mortgage loans. A portion of those loans are sold to investors, primarily in the secondary market, generally on a servicing retained basis. The Advisor and its affiliates may purchase servicing rights on residential mortgage loans. Including loans serviced for its own portfolio and loans serviced for the Company, the Advisor and its affiliates serviced residential mortgage loans having an aggregate principal balance of approximately $21.2 billion as of December 31, 2007.

 The Advisory Agreement had an initial term of three years and is renewed automatically for additional one-year periods unless notice of nonrenewal is delivered to the Advisor by the Company. The Advisory Agreement may be terminated by the Company at any time upon sixty days’ prior written notice. As long as any Series A Preferred Shares remain outstanding, any decision by the Company either to not renew the Advisory Agreement or to terminate the Advisory Agreement must be approved by a majority of the Board of Directors, as well as by a majority of the Independent Directors (as defined below under “Market for Registrant’s Common Equity and Related Stockholder Matters”). The Advisor is entitled to receive an annual advisory fee equal to $200,000, payable in equal quarterly installments, with respect to the advisory and management services provided to the Company. See “Certain Relationships and Related Transactions.”

 

CAPITAL AND LEVERAGE POLICIES

 To the extent that the Board of Directors determines that additional funding is required, the Company may raise those funds through additional equity offerings, debt financing or retention of cash flow (after consideration of provisions of the Code requiring the distribution by a REIT of a certain percentage of taxable income and taking into account taxes that would be imposed on undistributed taxable income, including capital gains), or a combination of these methods.

www.foreclosureinfosearch.com

 

The great BofA Hoax

Hiring as Production Soars, that according to a recent report of Quarterly residential originations nearly doubled at Bank of America Corp., which said it is hiring thousands of employees to handle the increase in its mortgage business.

Maher Soliman a Los Angeles based housing analyst diagrees and points to another weak lobbying effort. “It stinks of a lie” he said! “Last month the brokers will detroy America and this week Bof A is hiring anyone who can stand on two legs.

Quarterly earnings, meanwhile, jumped $6 billion. First quarter originations were 382,000 loans for $89.3 billion — soaring from $$49.9 billion in the fourth quarter, earnings data released today indicated. During the first-quarter 2008 — before the July 1, 2008, acquisition of Countrywide Financial Corp. — production was just $38.6 billion.

www.borrowerhotline.com
www.MortgageDaily.com/BoAProduction042009.asp

Every Letter of Objection to Trustee in Non-Judicial Sale States

Trustee has an obligation of fair dealing with both the borrower and the lender. All tooften the Trustee ʼs loyalties follow the money, for it is the Lender that pays the bills. A Notice of Non-Judicial sale is very much like a Motion for Summary Judgment in JudicialForeclosure States. It is designed to take the case off the docket and the get the saleover with as little trouble as possible — where the facts are not in dispute, the borroweris in default, the lender has followed all the necessary procedures, and the Lender is in fact collecting on a debt that is owed.

The Lender, by having the property sold isrecovering part or all of the debt owed to the lender.In the Mortgage Meltdown context however, everything is turned on its head formortgages originated between 2001-2008. The Lender has already been paid, doesnt won the note and is attempting to score a windfall by getting the property in addition tothe money it received from the REAL source of the financing.

And the Lender has received an undisclosed fee of around 2.5% of the total “loan.” The mortgage broker,the appraiser and other participants were also overpaid by as much as seven or eight times their normal fees to keep their mouths shut. The borrower s reliance on the good

THE REAL DEFINITION OF A CDO.

By gca0602

http://foreclosurewebpage.wordpress.com/ 

“Collateralized Debt Obligations (CDOs) are structured fixed-income and equity securities backed by a variety of assets including corporate loans, bonds, residential and commercial mortgages and other asset-backed securities.

CDOs are securitized products issued out of a special purpose vehicle or trust structure, with a variety of tranches issued that vary in seniority, coupon rate and credit quality. It is estimated that approximately $1 trillion in face value of CDO securities remain outstanding. Largely intended to be buy-and-hold securities, CDOs were issued on a 144A or Reg S basis, with limited information available for a buyer to accurately determine pricing in the secondary market¹(secondmarket.com).”

 

Can we get that simply?

 

A CDO is a security issued by a trust. A trust is a legal entity set up to own and manages property for someone else. Those two things together mean that if you buy a CDO, you own assets in the trust, but you don’t have any rights to the assets the trust owns.

If the trust is created with a Triple-A credit rating, then the CDOs issued by that trust will have a Triple-A credit rating. This sounds OK so far.

The trust can own all sorts of assets. Real estate, corporate stock, corporate bonds, mortgages, commercial loans, and even US Treasury notes can be owned by the trust. Still nothing new or surprising here.

Then the trusts split their assets into a variety of tranches and resold them by the tranch.

 

What’s a tranch?

 

Tranches are interesting stuff. Before I go on a little diversion is necessary here. If you buy common stock in a chapter C corporation, you own a piece of each of the assets of that corporation. If you buy preferred stock in a chapter C corporation, you also own a piece of each of the assets in the corporation. Before the First Depression, you could also buy asset backed stock, which gave you a piece of an individual asset in the corporation. For example, you could own $100 worth of a steam locomotive, along with 10,000 other investors. If the corporation defaulted an asset backed stock is made good by selling the specific asset and splitting the proceeds among the owners.

A tranch is like an asset backed stock. The word means slice. So to buy a tranch is to buy a slice of something. For instance, if a mortgage was written for $250,000, tranches could slice it into 5 bonds at $50,000 each. This is the way that Fannie Mae used to work.

 

What if you split the mortgage according to its payout dates? Someone could buy a 90 day slice and get everything the mortgage holder paid in 90 days. Someone could buy a 1 year slice and get everything paid over a year, and then a 5 year slice, a 10 year slice, and so on.

 

This method converts a 30 fixed asset into a series of fast cash turnarounds.Another way to slice an asset is to put pieces of one mortgage into multiple tranches. You can build 4 $100,000 tranches from 4 $40,000 mortgages if you put $10,000 from each into the mortgage.A lot of people considered this second method as a way to diversify your investment and spread the risk of a single investment across multiple tranches.

 

Think of what selling one of these nightmares is like.

Each CDO created by reselling these tranches has a real value based upon the tranches that form the CDO. But no one except the original trust knows the real value of the CDO and so it virtually cannot be sold.That’s why it’s called illiquid.Now consider selling a billion of them.

 

Splitting tranches across time divisions (90 day, 1 year, 5 year, etc) ought to be illegal. Splitting multiple assets into multiple resalable items (such as CDOs) ought to be illegal. Any organization which holds assets and sells investments based upon those assets ought to be required to be a chapter C corporation and those investments required to be common stock.