BLOOMBERG: BOA TRYING DIVIDE AND CONQUER STRATEGY

SEE LIVINGLIES LITIGATION SUPPORT AT LUMINAQ.COM

“By keeping the servicers at the head of the line, the illusion of securitization is maintained. That illusion serves as the basis for assuming there is a legitimate debt that the borrower is refusing or can’t pay. Without the illusion, and sticking with the facts we have an obligation owed to the investors or their successors that has been reduced by Federal bailouts that obviously inure to the benefit of someone. At the moment, the illusion of securitization is permitting the investment banks to assert that neither the investor-lender nor the borrower should get any credit for those bailouts and insurance payments, which is of course an absurd conclusion. ” Neil F Garfield

EDITOR’S COMMENT: BOA is not the only one. There exists a broad strategy of getting all of us to argue with each other rather than deal with the financial crisis in a direct, honest manner. The fact remains that the “servicers” are not the people that anyone should be negotiating with, because they don’t own anything and they have no independent right to make any decisions.

The reason why the negotiations are taking place with servicers is that those are the only companies that are stepping up, saying they are have the power, when they don’t. It is the same with the foreclosures. The securitizers are sending in a servicer or other sham entity to initiate foreclosure proceedings (or fake modification processing) and they are getting away with it because the Trustee of the pools neither knows nor has anything to do with the foreclosures in reality, and the investors are kept completely in the dark.

But even if the trustees and investors were given detailed reports and invited to participate they would not because they don’t want any part of the fake mortgage processing that occurred from origination through sale of bogus mortgage bonds. The trustees simply want the fees they were promised for agreeing to be trustees, on condition that they didn’t need to do any work or take any responsibility. The investors simply want their money back from the investment banking houses that brokered the sale of bogus mortgage bonds that had nothing to back up the payment of interest or principal.

Thus a void is created wherein the real parties in interest or even the ones with a colorable claim to being a real party in interest, don’t really have anything to do with foreclosures, modifications or anything else relating to individual mortgages. The illusion of securitization of loans that were never in fact securitized (transferred or pieced out to investors) allows the intermediary parties, like servicers, to claim some sort of agency status without being liable for the counterclaims of borrowers regarding predatory lending practices, deceptive lending practices, and the illegal marketing of bogus loan products as standard residential loans when they were in fact making the homeowner PART of the securitization scheme.

It follows that any “settlement” with servicers is meaningless and also an illusion. And without getting a FULL accounting for all financial transactions relating to each individual loan, regardless of the paperwork that was or was not executed, there can be no settlement, because there can be no knowledge as to the amount due to CREDITORS on these obligations after credits are applied for payments made by servicers, who continue to make payments even after a default is declared, and other third parties who insured or guaranteed payment of interest, principal or both.

By keeping the servicers at the head of the line, the illusion of securitization is maintained. That illusion serves as the basis for assuming there is a legitimate debt that the borrower is refusing or can’t pay. Without the illusion, and sticking with the facts we have an obligation owed to the investors or their successors that has been reduced by Federal bailouts that obviously insure to the benefit of someone. At the moment, the illusion of securitization is permitting the investment banks to assert that neither the investor-lender nor the borrower should get any credit for those bailouts and insurance payments, which is of course an absurd conclusion.

If simple arithmetic were used accounting for all transactions relating to each loan rather just a few of them, the entire housing mess would be cleaned up – but that would  also clean house at the mega banks who are maintaining “assets” reported on their balance sheets that never existed as THEIR assets, and which now are neither secured nor, in many cases, do they even exist. With Tier 3 assets gone, and Tier 1 assets marked down to Tier 3 assets and then extinguished the mega banks would become subject to resolution down to a size that could be regulated. And THAT in turn would release the marketplace from the monopolistic and false hold that these banks have on government and banking, allowing for free market competition and trading, generation of capital for new and existing business and a resurgence in housing, consumer demand the growth of GDP. With the latest GDP report at 1.8%, as opposed to the predicted 4%, we can turn a 50% loss into recovery and real gains.

BLOOMBERG: Bank of America Corp. (BAC) was accused by a top official at the Iowa attorney general’s office of engaging in a divide-and-conquer strategy by undermining support for the settlement of a nationwide probe into foreclosure practices, a person familiar with the matter said.

The bank tried to get attorneys general to break away from those supporting the proposed accord, Iowa Assistant Attorney General Patrick Madigan said during a recent conference call, according to the person. A second person familiar with the settlement talks said the bank sought to sow dissent among the states, eight of which have publicly criticized the proposal’s terms. Both people asked not to be identified because the talks are private. Madigan declined to comment.

“We have held face to face negotiating sessions and our negotiations continue,” Iowa Attorney General Tom Miller, a Democrat who leads the 50-state effort, said in a statement. “We believe all the banks are negotiating in good faith.”

Madigan, who was giving an update to state officials, said the largest U.S. lender by assets was taking a “divide-and- conquer” approach in a bid to disrupt negotiations, according to the person on the call. Jumana Bauwens, a spokeswoman for the Charlotte, North Carolina-based bank, declined to comment.

State and federal agencies including the Justice Department last month submitted a 27-page settlement proposal, or term- sheet, to five mortgage servicers, including Bank of America. The document was offered to start negotiations with banks as part of the 50-state investigation.

Six-Month Probe

The six-month probe was triggered by claims of faulty foreclosure practices following the housing collapse, which state officials said may violate their laws. The people said Madigan’s comments were made on a call that took place within the past two months, after the term sheet was made public.

Since the settlement proposal was circulated in early March, at least eight Republican attorneys general have assailed its terms as overreaching. They specifically oppose a proposal that would require the servicers to pay for reducing mortgage balances owed by borrowers.

In addition to Bank of America, the other banks negotiating with state and federal officials are JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC), Citigroup Inc. (C) and Ally Financial Inc. They control more than half of the mortgage servicing market, Miller has said.

Geoff Greenwood, Miller’s spokesman, said state attorneys general would begin talks with other mortgage servicing companies after reaching a final agreement with the five banks.

“We will start looking at servicers beyond the largest five after we finish this phase of our effort,” he said.

Principal Reductions

As of last week, the states had yet to approach banks with a proposed dollar amount that would fund principal reductions for borrowers, Greenwood said at the time.

Oklahoma Attorney General Scott Pruitt, a Republican, said last week he may negotiate an alternative accord with the banks if the national settlement turns out to be “inconsistent with our conviction.”

Pruitt said in a letter to Miller last month that forcing lenders to reduce mortgage balances would take away incentives for banks to loan money and “destroy an already devastated housing market.”

Besides Oklahoma, state attorneys general who have criticized the proposal to reduce principal balances are Florida, Texas, South Carolina, Virginia, Alabama, Nebraska and Georgia.

Four of them said in a letter to Miller that principal reduction constitutes a “moral hazard.”

No Overt Requests

Lauren Kane, a spokeswoman for Georgia Attorney General Sam Olens, said in an e-mailed statement that “no one has asked” Olens to oppose the settlement proposal. One bank, which Kane declined to identify, discussed with her office a recent settlement with federal regulators over foreclosure practices, she said.

“We have been in contact with numerous industry representatives on the local and national level, who have voiced their concerns throughout the process,” said Diane Clay, a spokeswoman for Pruitt, in an e-mailed statement.

Adam Piper, a spokesman for South Carolina Attorney General Alan Wilson, said “two banking representatives shared research” with his office and “pointed out some concerns with certain provisions.” While not identifying the banks, he added that they didn’t ask Wilson to oppose a potential accord.

In their talks so far, the states agreed on some terms while failing to reach an accord on monetary payments by lenders, a person familiar with the talks said this month.

Mortgage Servicers

In March, mortgage servicers agreed with U.S. banking regulators to a series of reforms, including conducting a review of loans that went into foreclosure in 2009 and 2010 and improving procedures for modifying loans and seizing homes.

The 50 states and the Justice Department seek to set requirements for how banks service loans and conduct home foreclosures.

Any state agreement with banks on principal reductions will depend on the size of the writedowns, the incentives for the servicers built into the settlement and other details which continue to be sorted out, said the person, who declined to be identified because the talks are confidential.

Another person familiar with the talks said last week that a final agreement could take as long as four months to reach.

Pruitt said his plan could be a model for other states.

On April 26, Jennifer Meale, a spokeswoman for Florida Attorney General Pam Bondi, said Bondi “looks forward to reviewing” Oklahoma’s plan. Yesterday, Meale said Bondi hasn’t been urged by the banks to oppose the term sheet.

“We have had general discussions with banks about how the matter might be resolved,” Meale said in an e-mailed statement.

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

Tags: bailout, Bank of America, borrower, countrywide, disclosure, discovery, foreclosure, foreclosure defense, foreclosure offense, fraud, Lender Liability, mortgage meltdown, predatory lending, quiet title, rescission, RESPA, securitization, TILA audit, trustee, Wells Fargo
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