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. 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. MERS serves as the mortgagee for lenders, investors and their loan servicers in the county land records. 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  and provides a central source of information and tracking for mortgage loans. MERS helped make mortgage-backed securities possible and helped to also facilitate the United States housing bubble. 
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.
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