How to Deal with Claims of Mortgage Selling and "Successors"

A reader recently asked about Lehman, noting that many from the old Lehman crowd have regrouped under Matrix Private Capital Group in New York. Even Richard Fuld is there. In any case involving Lehman-engineered “loans,” one critical step should be considered: take his deposition.

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What Lehman Actually Did

Here’s the counterintuitive truth:

• Lehman wasn’t really buying anything.
• What it did do was pay for the funding of loan originations.

Since that payment was already made, the originator didn’t need to be paid again to “sell” the note and mortgage. And because the originator itself never paid anything in the first place, it had nothing real to sell.

In short: originators never received true payment.

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The Goldman Sachs Blueprint

Lehman adopted a business plan pioneered by Goldman Sachs:

• Create multiple levels of securities based on the appearance of loans.
• Avoid becoming a lender, thereby dodging state and federal lending laws.

To make this work, the banks had to fabricate paperwork after origination—to simulate the illusion of loan sales. The result? Documents that were:

• Fabricated
• False
• Forged
• Backdated

And yet, most lawyers and judges—trained to treat written instruments as gospel—accepted these papers as valid.

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The Boarding Process and False Records

Because the underlying transactions were illusory, the so-called boarding process (the transfer and review of loan files) is largely false. Payment histories are controlled by central repositories like Black Knight, while the true recipients of payments remain hidden.

This secrecy is both illegal and extra-legal, and it prevents homeowners from seeing who actually receives their payments—the supposed “creditor.”

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Stop Believing the Documents

The lesson: stop believing anything prepared by or for investment banks. Yes, homeowners owe obligations—but they may never have had a legitimate lender.

Legally, enforcement of a debt requires someone to prove they paid for the obligation and therefore own the note and mortgage. But no one steps forward, because that would conflict with investors who think they “own” the loans—without the responsibilities of ownership.

Instead of reforming the instruments to designate a true creditor, law firms chose the illegal route, protecting profits by keeping disclosures hidden.

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The Illusion of “Loan Payments”

Here’s what the banks don’t want you to ask:

• Was the money given to homeowners truly a loan?
• Or was it simply a payment, exchanged for a note and mortgage needed to fuel securitization?

If it was the latter, then under normal legal analysis, the loan lacks valid consideration. Homeowners essentially pledged back what they received the moment they signed the note and mortgage.

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Homeowners’ Right to Compensation

Despite the illusion, securitization schemes went forward. That means homeowners may be entitled to quantum meruit compensation:

• Typically 5% to 15% of securitization revenue should be allocated to the homeowner.
• Average revenue is about $12 for each $1 of a loan transaction.
• That translates into $0.60 to $1.80 per $1 of the “loan”—plus interest.

So while the homeowner may owe the nominal $1 obligation, they are also owed significant compensation for enabling the scheme.

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The Bottom Line

A $200,000 mortgage could entitle a homeowner to between $120,000 and $360,000 in quantum meruit compensation—plus interest.

This is the hidden truth Wall Street doesn’t want disclosed. And until courts and regulators confront it, homeowners must challenge the illusion of lender legitimacy and fight for fair recognition of their role.

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About the Author

Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.

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