Fannie and Freddie Farce: How the Securities Brokerage Firms Are Using the Names of the GSE's as Cover for False Claims

There are lots of false assumptions about The Government Sponsored Entities. First, just because they are called “Government sponsored” doesn’t mean that the Federal Government is actually backing all of their activities. But the vagueness of their actual business plans enabled the Obama administration to nationalize them in order to facilitate the creation of a resting place (see Maiden Lane ventures) for all the toxic mortgages and toxic “certificates” that had been sold to unsuspecting borrowers and investors.

The other assumption — equally erroneous — is that Fannie and
Freddie ever owned the debts of many borrowers who assumed that
because the names of Freddie and Fannie were invoked that they were
involved.

There were occasions where Fannie and Freddie actually paid cash. One
was where they had to pay the guarantee which was in fact backed by
the Federal government. But they were covering losses in that scenario
and not buying the debt. The foreclosure had already occurred, many
times with the court thinking that this was Fannie and Freddie
foreclosing. It wasn’t. The other was some payments in cash for
certificates issued in the name of REMIC trusts (by investment banks
doing business as the name of the “Trust”). Again The GSEs were not
buying debt, they were buying securities.

In most cases Fannie and Freddie were acting as Master Trustees
representing the sub trustees of named REMIC trusts that actually
didn’t exist primarily because neither the “trust” nor the investment
bank (securities brokerage firm) had ever received ownership of the debt. The investment bank had caused the loan to be funded through conduits but it had not received any conveyance of ownership of the debt and did not carry the loan as a receivable at all or at most it held the receivable for thirty days.

So the conclusion reached by anyone who bothers to learn the details of all this is simple: Fannie and Freddie were used as  cover for making false claims. All the securitizations schemes depended upon nobody owning the debt because that would make them lenders subject to liability for violation of Federal and State lending laws. And that is why all the documents in foreclosure are fabricated: they are solely intended for use in foreclosures and nowhere else.

The most basic black letter law in this country governing civil matters is that you can’t get a remedy in court unless you have been injured by some action or inaction of the defendant. If you don’t own the debt then you are not injured.

It is the securities brokerage firms (investment banks) that created this scenario without the knowledge, consent or even acquiescence of borrowers or investors. Neither borrowers nor investors should be required to pay for a flawed scheme that deprived both classes (investors and borrowers — of a fair share of the enormous profits created by making bad loans.

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