HOW INSURANCE PROCEEDS FROM AIG, AMBAC SHOULD BE APPLIED TO HOME LOAN BALANCES

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EDITOR’S NOTE: Insurance companies are getting riled up about everything. As they discover that Goldman and other venerable institutions used the power of their brand as a substitute for telling the truth, they are suing.

The problem for insurers is a windfall for homeowners if they take advantage of it. The insurers specifically and expressly waived the right to pursue the underlying claims (i.e., the home loans) when they paid claims or made investments. The dirty little secret is that all that money AIG, AMBAC and others paid (including the Federal Reserve, U.S. Treasury et al) using mostly taxpayer money was (a) paid for nothing but (b) received as payment on the obligation. Wall Street wants the insurance money but it was paid to offset the losses declared by Wall Street on the underlying mortgages.

That means the obligations to investors were correspondingly reduced or should have been. Since the securitization documentation that the pretenders are using is the sole basis for their claim to foreclose, an agency relationship is established between the investor-lenders and the rest of the securitization players. Thus the insurance payments, the government bailouts, the counterparty payments were all paid and received under the express terms of the the agreements drafted by Wall Street. In those agreements the payments were NOT allowed to be used as a basis for subrogating to the rights of the creditor. Thus the payment was made and the second creditor (the insurance company) expressly waived its right to collect.

So what you have is two creditors — the investor-lender and the insurance company. The first creditor has elected not to pursue any potential remedy against individual homeowners even as the agents of the investors seek to collect for themselves (despite the fact that they never advanced the loan nor purchased it). The second creditor extinguished its rights as a creditor  voluntarily by express wording of their contract for insurance, counterparty on credit default swap etc. The only possible analysis of this is that either the note was split into two creditors, one of whom is barred from making claims and the other is electing not to pursue those claims.

The part that was paid by insurers et al should have been credited to investors’ accounts and in some cases probably was in fact credited to investors accounts but we won’t know that without discovery aimed at this very important feature of the money trail in the securitization illusion. THAT PART THAT SHOULD HAVE BEEN CREDITED TO INVESTORS, WHETHER IT WAS OR WAS NOT ACTUALLY CREDITED, REDUCES THE BORROWERS LOAN OBLIGATION WHETHER HE/SHE WAS MAKING PAYMENTS OR NOT. But this accounting is NEVER provided to the Court, to the Trustee of the Pool, to the Trustee on the Deed of Trust or anyone else. YOU MUST SEEK IT IN DISCOVERY.

Once revealed. it will prove that the notice of default was defective in the amount it claimed in addition to being defective because the servicer was still making payments to the investor-creditors to mislead them into believing the loan was performing. The use of substitute trustees that are owned and controlled by the banks enables them to avoid these factors because they are calling the shots — ordering the trustee to violate his statutory and common law duties of due diligence.

Tags: bankruptcy, borrower, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, securitization, TILA audit, trustee
Posted in bubble, Corruption, Eviction, securities fraud |