Another Countrywide Settlement: And Still No Disclosure of What Is Wrong

see http://www.housingwire.com/articles/37033-finally-85b-countrywide-mortgage-bond-settlement-gets-green-light?eid=311685972&bid=1405266#.VzY9zv-rw6o.email

see also https://livinglies.me/2013/12/11/new-bank-strategy-there-was-no-securitization-irs-amnesty-for-remics/
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So just to set the stage: we have had hundreds, if not thousands, of settlements between investors and the banks, between government and the banks and between individual “borrowers” and the banks (the latter always being under seal of confidentiality). The Department of Justice has set the tone by declining to get into details about what the banks have actually done. Writers like myself have given considerable bulk and detail to the misdeeds of Wall Street. None of us like the settlements or the failure of law enforcement to prosecute bank fraud by the banks.

But this article is about something else, to wit: what is the effect of these settlements on the purported loan contracts and rights to enforce against those who are called “borrowers?”

Let’s take the obvious first. SOMEONE is paying $8.5 billion this time. It isn’t Countrywide who no longer exists. It might be Bank of America who claims to own Countrywide, despite published reports that Countrywide was acquired by Red Oak Merger Corp. And in this case it looks like certain investors are getting most of that settlement money. And we know that the settlement arises out of claims of securitization that were obviously false. Both the loans and the mortgage-backed securities (MBS) were not just misrepresented; they appear to have been invented.

OPM (Other People’s Money) has always been the mantra of Wall Street. Truth be told, that is what the titans are there for — to move money and make capital more accessible. It is on Wall Street that one can start an enterprise and get it financed through shared risk of many investors. The problem that arises is when the moral compass is sent spinning by the practice of merging the enterprise seeking financing with the underwriter (Investment Bank) who is creating and selling the MBS.

In short, what we are left with is what you would expect — illusory entities creating illusory, uncertificated “bonds” that are worthless immediately upon the occurrence of a singular event, to wit: when the investment Bank takes the money from investors and instead of giving it to the “issuer” enterprise (REMIC Trust) the money is deposited into a dark pool along with the money from thousands of other investors who thought their money was segregated for management within a pass-through vehicle known as a REMIC Trust.

Investors are clueless because they are getting a statement from the brokerage house through which they buy and sell securities. The end of month statement says they own so many MBS and the value is $XYZ. They don’t know their money was diverted from the REMIC Trust into a dark pool completely controlled by the underwriter. They don’t know the underwriter has started on a venture in which the underwriter uses investor money as the money of the investment bank and not as representative of investors. Small wonder the investors sued when they figured it out.

The investors also didn’t know that their money was being used to originate loans instead of acquiring them. AND they surely didn’t know that the loans were dirty and high risk. But most of all the investors didn’t know that the “loans” were being made in the name of remote companies, most of them thinly capitalized, and that the investors had no rights to the loan documents, contrary to the express wording of the prospectus and PSA.

So the investors found themselves having rights against the investment bank for fraudulent conduct but not rights directly to the loan without suing for those rights. But knowing they were in a dark dynamic pool it was impossible for them to identify loans, and for how much, their money was into each “loan.” So they were the source of funds for each loan but they don’t know which loans, to whom or for how much.

This is not the fault of the homeowners by any stretch of the imagination. The alleged loan contract, was created as an illusion wherein there was no creditor identified (contrary to law) and where there was no lender either who signed any piece of paper identifying themselves as lenders or creditors. The “closing” was really a food processor where a lot of assumptions were made and none of them were true. This irks judges but for some reason they seem to direct their ire toward the borrower for calling out these obvious deficiencies in lending and foreclosing.

So my first question is this: assuming the investors got some or all of their investment back, under what circumstances would there exist (a) a default and (b) an enforceable loan contract and (c) ANY definable amount for “reinstatement” required under virtually all written mortgages and notes — signed only by the homeowner and missing any contract or other document in which the lender agreed to be the lender and was in fact the creditor making the loan?

If we assume that these settlements are all going to the investors and not to the nonexistent REMIC Trust, then we should assume that the Trust owns nothing and never did. In fact, we should assume that the REMIC Trust was never funded nor even active as a business entity. Otherwise the investors would not be the claimants nor would they be the recipients of the settlements. The claimant would be the REMIC Trust if only it existed. So why is it that Courts continue to treat the Trusts as real?

Once the settlement money is paid there is no loan receivable or there is not much left of it. “Borrowers” should receive notice of that. The only circumstance under which that might not be true is if the Investment Bank paying off the investors for claims of fraud, was as part of the settlement, buying the loans from the investors. But there is no evidence that is happening nor are the banks ever alleging such a fact pattern.In fact, most of the MBS were sold to the Federal Reserve at face value as part of the scheme to “save the banks.” The Fed was accepting ownership of worthless MBS from an entity who had sold them already to investors. So the investment bank sold the MBS at least twice. An extended analysis would show that the number of time a given set of MBS were sold far exceeds the number 2. And what was not sold to the Fed was “re-securitized” (i.e., sold to another trust.

So we have the banks  who have already created “profits” by reselling the same loans multiple times to multiple nonexistent trusts, whose MBS were sold multiple times. AND now we have the investors, whose money was used for this absurd scheme, who are being paid to settle their claims for the investment that should have gone to the REMIC Trust — but which can’t be identified or connected with any specific loan.

The Government thinks that if words gets out the entire economy will collapse because everyone will know that none of the loan contracts are enforceable within the major subset of alleged loans subject to false claims fo securitization. They assume this would be a bad thing when in fact the net result would be a vast stimulus to our economy from people who thought they were under water and now find they have equity in the only major investment they ever made — their home.

Making such an allegation on record would open the door to discovery and the borrower would discover that (a) there was no loan contract and (b) that the party to whom they were obligated to pay was a party that had no legal existence — i.e., a dark pool that was dynamic in the sense that money was coming in and out of it every minute of every day. All of that explains why the banks fight so hard against disclosure of the identities of creditors, to wit: there is no creditor that can be identified in the legal sense.

That said, the question on the table is how is anyone accounting for the money paid in this or any other settlement? Is there information that is part of the settlement that would affect the right of enforcement against homeowners? Has the amount due to ANY creditor — real or imagined — been reduced by their receipt of money paid on account of their bond receivable from an illusory trust? If not, why not?

DISCOVERY: I think it is time that we started making inquiry into the settlements that involve loans claimed by REMIC Trusts whether they are real or not. I think the outcome would eliminate any possibility of enforcement of the note and mortgage and/or that the amount due under any theory of collection would be greatly reduced by the amount of money received by the investors, either of which outcomes would eliminate foreclosure as an option to those claiming to be creditors.

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