Bankruptcy Trustee Accuses banks of Manipulating "Margin Calls" on Mortgage Bonds

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EDITORIAL COMMENT: WELL it looks like this is not over yet. The accusations are right on target — the more they drill down the more they find which is what we have been saying on Livinglies for 3 1/2 years. That’s what we keep doing in our COMBO title and securitization analysis and what we are teaching lawyers in our seminars.

Maybe the judiciary will wake up and realize that all these title and securitization reports should not be the burden of homeowners to produce. Maybe they should realize, in line with existing law, that the party seeking affirmative relief is the pretender lender who wants to forcibly take a home away from otherwise good citizens. Maybe Judges will realize that the party seeking affirmative relief is the plaintiff no matter what foreclosure procedure is invoked and that party must plead and prove a foreclosure case just like banks have been doing for centuries.

Maybe everyone will realize that just because the borrower stops paying doesn’t mean the payment was due or that the creditor didn’t get the money and that the declaration of default and all that comes after that is a farce without the laughs. Deutsch was Trustee for most of these pools, followed by US Bank. We already know they lied, cheated and stole at all levels of the fake securitization that was never backed up by actual transfers, and that that the original mortgages were fatally defective. Acknowledging that fact will cause pain only to Wall Street which in all events MUST go through the pain of shrinking back down to a proper size of 12-14% of GDP instead of its current reign of 50% of all measured services and products produced by the United States.

Maybe the narrative wil finally shift to the truth. It isn’t borrowers who are delaying the inevitable foreclosure. It is the banks that are delaying the inevitable collapse of the entire foreclosure and mortgage structure and the reduction not just of principal due on the mortgages, but a reduction in the real value of assets on their balance sheets and hence their power and market-share in what SHOULD be a free market.

Banks Sued in Thornburg Bankruptcy

By REUTERS

WILMINGTON, Del. (Reuters) — The bankruptcy trustee for Thornburg Mortgage has sued Goldman Sachs, Barclays and other big banks for a combined $2.2 billion, blaming them for its bankruptcy.

The trustee filed four separate lawsuits, the most extensive of which blames a “collusive scheme” by units of JPMorgan Chase & Company, Citigroup, the Royal Bank of Scotland, Credit Suisse and UBS for driving the company into bankruptcy.

The trustee, Joel Sher, accused the five banks of acting together to use a series of unjustified margin calls to extend their control over Thornburg, which was once a leading provider of “jumbo” home loans.

The lawsuit seeks to recover $2 billon for fraudulent conveyances and transfers by the banks, which had financed Thornburg’s mortgage-backed securities.

The trustee said the banks eventually drove Thornburg into Chapter 11 in May 2009. It sought protection from creditors with $36.5 billion in assets, making it one of the largest bankruptcies during the financial crisis.

Citigroup said the lawsuit was without merit. Credit Suisse and UBS declined to comment. JPMorgan and RBS did not immediately return a call for comment.

Mr. Sher was appointed to run Thornburg after the company’s executives were accused of using Thornburg’s staff and offices, without creditors’ approval, to start a new company.

The trustee also sued Barclays, claiming it improperly seized mortgage bonds from Thornburg in 2007 by undervaluing the securities in a series of margin calls. The trustee is seeking at least $94 million.

Barclays declined to comment.

Mr. Sher sued Goldman Sachs, seeking at least $71 million and accusing the bank of scheming to seize hundreds of millions of dollars of investment-grade mortgage bonds that Thornburg had pledged as collateral.

Goldman Sachs declined to comment.

The final lawsuit claims Countrywide Home Loans, which was acquired by Bank of America, breached representations and warranties on the loans it sold to a unit of Thornburg.

That lawsuit was also brought on behalf of a group of investors known as the Zuni Investors, who were represented by David Grais of Grais & Ellsworth.

Mr. Grais has brought numerous “putback” lawsuits that seek to have originators like Countrywide repurchase mortgages that fell short of promised standards.

Bank of America did not immediately return a call for comment.

Tags: bailout, Bank of America, bankruptcy, Barclays, borrower, Citigroup, Credit Suisse, disclosure, foreclosure, foreclosure defense, foreclosure offense, fraud, Goldman Sachs, JPMorgan Chase & Company, rescission, Royal Bank of Scotland, securitization, TILA audit, trustee, UBS
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