Deutsch: Trustee in name only

TOO BIG TO GO TO JAIL?!?

YOU MUST SEE THIS REPORT: Banks “Losing” Mod Applications Same as the Notes

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Editor’s Comment: Echoing the analyses presented here over the last few weeks, our senior securitization analyst wrote me this note which corroborates the basic assumption that everything is upside down. In the recorded words of Reynaldo Reyes at Deutsch — “it is all very counter-intuitive.” It is also wrong, illegal and probably criminal.

That is a euphemistic way of referring to a shell game that is covering up the largest Ponzi scheme in human history — and one which is still on-going because regulators and law enforcement either refuse to see it or simply don’t have the resources to study it.

We are left with the appearance of a REMIC — the equivalent of what I once called a holographic image of an empty paper bag. We have a paper trust that is both unfunded and in which there are no assets, that was routinely ignored by the investment bankers who directed them to be written but not used. We have beneficiaries who think they are holding asset-backed mortgage bonds when there are no assets to back up the bonds because the bonds were issued by the empty trust. Investors are paid out of their own money and the sale of new “mortgage bonds.” Classic PONZI.

Then as Dan so simply explains it, you have a paper “trustee” over the paper trust, where the paper trustee has been stripped of all powers — powers that are 100% delegated (back to the banks acting as servicers) in the documents written for the trust, unless the investors say otherwise, but there is no way for investors to identify other investors in the paper trust in order to compare notes and give instructions to the trustee.

Same as the homeowner who has kept asking “which trust owns my loan.” The answer is that none of them do. The banks don’t own the loan either. It is the investors who own the loan receivable, but the loan receivable is neither documented nor secured.

Everything else is just paper and ink that didn’t matter to the investment banks who were creating servicing entities and other exotic vehicles through which they could “trade” loans that didn’t belong to them, receive insurance on losses they didn’t have, get federal bailouts on lies about mortgage defaults when it was only the threat of NOT receiving an undeserved windfall that the banks were worried about — 100 cents on the dollar for loans and fictitious pools for each insurance or CDS contract they purchased — using the investors money.

As Dan points out, the entire scam comes back to one thing, as it always does in an illegal fraudulent scheme — control was by the banks who should have only served as intermediaries both on paper and in action. They did neither. They posed as the investor when it suited them and even changed MERS records to show that, as if it were true. They posed as owners of an obligation from homeowners when they neither funded nor purchased the loans.

AND they convinced Judges that millions of foreclosures should be allowed where the bank acting for itself and on behalf of the paper trust, submitted a credit bid from entities that never had any money or assets, much less ownership of the loan receivable.

The plain simple truth is that if you compare what should have been done if this was honest dealing, is that the money invested would have gone into the pool (REMIC, SPV, Trust) and the used to fund mortgages. Instead the money went elsewhere and no loans were assigned into the pool, the mortgage bonds were worthless, and the complexity of the fraud has so far been too daunting for law enforcement and regulators to step in.

If this was a legal transaction in which the  intent of the investment banks was honest, the instructions to the closing agent and the documents and disclosures would have the name of the pool all over them. Instead they put in the names of entities who were neither acting as brokers nor lenders. And the purpose of the banks was to “borrow” the funds from one end and “borrow” the fraudulent documents on the other end and trade for their own benefit. Obama’s advisers are just plain wrong when they tell him that the transactions were bad or wrong, but legal under existing laws and regulations.

I still believe that law enforcement and regulators are both stepping in and getting their ducks in a row. Unraveling something this complex on paper, requires a solid foundation of knowledge in which they can ignore the paperwork just like the banks did. After that it becomes clear that this is just another Ponzi scheme based upon tens of millions of fraudulent documents were produced supporting tens of millions of transactions that were never completed in which tens of millions of recorded documents lie ticking like a time bomb in the county recorders’ offices, only to surface later as a blight on a corrupted title system.

Tags: agent, Dan edstrom, principal, servicers, trustee
Posted in bubble, Corruption, Eviction, securities fraud |