Another Failed Bank: 45th this Year — MegaBank Failure on the Way

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“MEGABANKS IN STATE OF UNDISCLOSED FAILURE“

Fortune has examined dozens of court records that corroborate the
employee’s testimony. And if Countrywide’s mortgage securitizations
systematically failed as it appears they did, Bank of America’s
potential liability dwarfs its shareholder equity, as the
Congressional Oversight Panel points out.

Field is referencing Countrywide v. Kemp, and the sworn testimony of
Linda DeMartini, a top official at BofA. She acknowledged on the
record in a deposition that Countrywide never conveyed the mortgages
to the trusts, and that Countrywide notes “weren’t endorsed except on
a case-by-case basis generally long after securitization ostensibly
occurred.” This would mean that the mortgage-backed securities
composed of Countrywide loans are, in fact, non-mortgage-backed
securities. And Field did the grunt work of looking at the court
records, which back up DeMartini’s claim. None of the 104 Countrywide
notes she looked at in two New York counties were endorsed originally.
Read the whole story, it’s a good one.  [cont’d.]

EDITOR’S NOTE: 45 BANKS HAVE BEEN SEIZED BY THE FDIC. BUT THAT IS ONLY 1% OF THE STORY. THE REST OF THE STORY IS THAT ANY BANK HOLDING “MORTGAGE-BASED ASSETS” HAS ALREADY FAILED BUT IT ISN’T DECLARED. And with the Federal Reserve getting ready to raise reserve requirements, the situation is going to get worse for the MegaBanks until their auditors can’t stand the suspense any more.

Just as the GDP is misstated by the reports of the megabanks with their trading activity being the largest source of “revenue” and the trading being a cover for repatriating money stolen during the mortgage meltdown, the illusion of activity, revenue and profits is being dispelled by questions among auditors as to how to treat the mortgage-based assets. The auditing firms stand to lose a lot if they don’t  take action in a way that  shields them from potential liability. When these Mega Banks finally tumble, they will take the auditing firms and potentially others with them.

By my reckoning and the analysis offered by others who are recognized experts, BOA, Citi, Chase, Morgan, Wells Fargo and others are already failed banks. A large part of their balance sheet is based upon assets that do not exist, never existed, and cannot be brought to life, much less onto a balance sheet as a true asset. Title analysis and securitization analysis shows clearly that each closing of each of more than 80 million residential real estate transactions shows the following, for each loan that was claimed to be part of a securitized transaction:

1. The party identified as “lender,” “mortgagee”, or beneficiary was either a non-lending institution or an institution who could have loaned the money but didn’t. The pattern of conduct was table-funded transactions, which according to the Truth in Lending Act and Reg Z are presumptively predatory loans. They are considered predatory because by depriving the borrower of important information concerning the identity of the actual lender/creditor, the borrower was prevented from knowing facts that went into the decision about whether to execute the documents. It was fraud in the inducement. The failure to disclose the table-funded nature of the transaction, hidden fees paid to the party identified as the originating lender were withheld from the disclosure statements given to the borrower. Thus, by not knowing who he/she was dealing with and by not knowing about all the extra fees distributed in the feeding frenzy, the borrower was not alerted to the fact that excessive fees were being paid to everyone concerned, including the mortgage broker and the appraiser. Failing to know this, the borrower was unaware that by shopping further, the truth about the price of the loan, the loan appraisal, and the viability of the loan were not only withheld from the borrower, but were used against him/her. This in turn gives rise to rights of rescission which have been often declared by the borrower but ignored by the servicer and the securitizers, as well as causes of action for fraud that could easily exceed the nominal balance of the mortgage stated on the closing documents.
2. Each documented transaction then creates an unresolvable defect: the party identified on the closing documents was neither the source of funding nor the creditor in any sense of the word. They were acting in most cases as an unregistered unregulated mortgage broker and straw-man for an undisclosed creditor. The effect of this is that the note names a payee based upon a loan from that payee that the payee never funded. The note therefore while appearing real on its face is actually a nullity (void) because it describes a transaction that never in fact took place. Like wise, the mortgage purports to secure the named lender for collection of the balance due on the note. The balance due under the note is zero because the transaction described never took place. While it is possible to reconstitute the mortgage and maybe even the note, it would take a lawsuit filed in a court of competent jurisdiction, in which the Plaintiff pleads and proves a case that there was a scrivener’s error in the identification of the lender and payee. This is why the notes were never actually transferred and why it is necessary for the Banks to fabricate and forge documents to make it appear that their was a transfer of the note and mortgage when the underlying transaction did not exist. While the courts have largely fallen for this ploy, more and more Judges are realizing that the paperwork does not add up.
3. Each monetary transaction dubbed “mortgage loan”  is undocumented and unsecured. The investor-lender was the source of funds and either the investors lenders should have been described, as they are now, as “certificate holders” (a euphemism because the certificates were never issued either) or if the pool was actually created and a trustee or manager appointed as authorized agent, the Trustee or agent should have been named as a payee on a note and the secured party on a mortgage. The presence and identity of the presumed creditor was already known (but withheld from borrower)  at closing, although possibly not known by the title agent or escrow agent. The proper parties were not named in the closing documentation and even if they were, the money trail shows that the funds taken from the investor were not used in the manner expected or desired by the investor, with special emphasis on those instances in which the investment bank took as much as 50% or more of the investor funds and claimed them as profits, which were secreted off-shore, and which are gradually being repatriated  to create the illusion of trading profits when in fact the profits are not real nor legal. The absence of documentation for the actual monetary transaction means that none of these transaction are secured.
4. While the true source of the funds for the loan were the investor-lenders, the only documentation received by the true creditors was executed by parties other than the homeowner-borrower. Those documents refer to the documented transaction with the straw-man lender and not the actual monetary transaction. Hence the investor-lender does not have a signed note, mortgage or any agreement with the homeowner-borrower. In all cases in which a different agreement with different parties is attempted to be used as evidence of the obligation, the case fails. Thus the assets claimed by any alleged “owner” of the mortgage documentation are worthless because the documents describe a transaction that is fictitious while those same documents scrupulously avoid describing the real transaction. 
5. While every state has a procedure to correct, modify or reform documentation that is prepared in error, the facts show that these documents were intentionally prepared with defects. The party to bring such an action to straighten out the paperwork is the investor-lender or the authorized agent who brings such a lawsuit naming the disclosed principal(s) for whom the action is filed. 
6. The investor lenders have chosen NOT to file such actions and NOT to pursue the homeowners for collection. There are economic and legal reasons for the investors avoiding any attempt to collect from the homeowners. The economic reason is that the best the investor can hope for is that out of the money that was advanced by the investor only part was used to fund mortgages, and the only part of the advance that could ever be claimed against a homeowner is not the larger amount advanced to the investment banker but the smaller amount advanced to the homeowner or on the homeowner’s behalf. Thus in order to make the claim and recover theoretically in full, the investor would have to name BOTH the homeowner and the securitizers (including the investment banks, whom the investors ARE suing for payment in full) to reach all the potential claims for all the money advanced. The investors in short have elected their remedy and have sued the investment bank. The second economic reason for the investors’ decision to not pursue the homeowner is that they are looking at collateral  that was overstated at the time of closing, and now obviously showing its true value at a fraction of the amount that was funded for the loan, which fraction is lower than the amount allocatable as advanced by the investor for making the loan. Thus for every $1 originally advanced to the investment bank, the investor is, for the most part, looking at a maximum recovery of at best 30 cents. But by suing the investment bank, the investor gets the benefit of claiming 100 cents on the dollar because it includes all money advanced to the securitizers, whether deployed for mortgage funding or not, and incorporates the appraisal fraud at closing.
7. The legal reason why the investors do not want to pursue homeowners, is that they would be “owning” the homeowners’ affirmative defenses and counterclaims which if fully adjudicated could easily exceed the balance due under the loan, which is unsecured as described above. 
8. Since none of the securitizers were the actual source of funding for any of the loans, the only theoretical asset they hold is a mortgage bond they are holding because they got stuck with it before they could sell it off to unsuspecting clients. But the mortgage bond is based upon (a) a transaction that did not exist (see above) and (b) even if the transaction did exist, the transfer into the pool never occurred, thus rendering the mortgage bond worthless or less than worthless if the bond was subject to tranche counterparty indebtedness. 

Hence the asset on the books of the securitizers related to mortgage “interests” is an illusion. And the failure of the auditors to make a statement regarding the questionable nature of these assets is actionable. But more importantly, the assets claimed on the securitizers balance sheets constitutes a large portion of their total assets. Wipe those out and the bank is suddenly smaller and out of compliance with the reserve requirements of the Federal Reserve and any other agency regulating the activities of a lending institution. Unless they suddenly repatriate the hidden fees from the mortgage meltdown which I estimate to be around $2 trillion, the bank is in the state of undeclared failure. And if they do repatriate the money all at once, they will have a lot of questions to answer including why they needed a bailout.

Failed Bank Tally Reaches 45 in 2011

By THE ASSOCIATED PRESS

WASHINGTON (AP) — Regulators on Friday shut a small bank in South Carolina, the 45th bank failure this year.

The Federal Deposit Insurance Corporation seized Atlantic Bank and Trust, based in Charleston, S.C., with $208.2 million in assets and $191.6 million in deposits. First Citizens Bank and Trust, based in Columbia, S.C., agreed to assume its assets and deposits.

The F.D.I.C. and First Citizens Bank agreed to share losses on $141.8 million of Atlantic Bank’s assets. The bank’s failure is expected to cost the deposit insurance fund $36.4 million.

Tags: BOA, Chase, Citi, failed bank, FDIC, FEDERAL RESRVE, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, JPMorgan Chase, MORGAN, mortgage meltdown, OCC, OTS, predatory lending, quiet title, rescission, securitization, TILA audit, trustee, Wells Fargo
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