Summary of LivingLies Findings Re Residential "Mortgage" Foreclosures

We are always evolving either in the way we look at or express the original ideas and strategies I proposed back in 2007. Here is a summary that litigators might find helpful in preparing their pleadings or motions to enforce discovery.

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SUMMARY OF PRESUMPTIVE FACTS

The facts upon which this blog is based are summarized as follows:

Actions relating to misbehavior of the banks in connection with the securitization of debt — and more specifically collateralized debt — and with final specificity, the securitization of debt secured by residential property.

Based upon information, interviews and analysis, Neil F Garfield, has taken the position that the REMIC trusts were in most cases unfunded. Thus they could not possibly have entered into transactions in which they originated or acquired loans because they lacked the funds to pay for the origination or assignment — despite “documentation” to the contrary. With the REMIC Trusts inactive, no entity pretending to be authorized by the Prospectus or Pooling and Servicing Agreement has any actual authority to act for or on behalf of the Trust or Trustees without the action being void under New York laws governing common law trusts.
Specifically broker dealer firms took the money from investors, but never funded the REMIC Trust and instead held the money in their own account. This is partially based upon our information that no Trust account was ever established in the name of the Trustee named in the Pooling and Servicing Agreement, that the Trustee did not administer any trust because of the absence of the res, and that the money was diverted from the Trusts for the nearly exclusive use and benefit of the broker dealer who accepted the payment of money by investors, who were “issued” uncertificated or certificated “mortgage bonds” issued by the trust whose value was derived from collateralized residential loans held or passed through the REMIC trust.

The “bonds” were issued in nominee street name, non-objecting, giving the broker dealer the opportunity to purchase insurance, guarantees, co-obligations from third parties, proceeds of credit default swaps all of which were made payable to the broker dealer who has neither reported the receipts nor paid or credited the investors with those proceeds. Large sums of money were skimmed off the top, making return of principal virtually impossible (tier 2 yield spread premium), and requiring the “presence” of loans bearing average interest rates much higher than those expected by the investors based upon much lower credit worthiness of the borrowers — a direct violation of the restrictions on stable managed funds, who constituted a majority of the investors.

Several “layers” (Goldman calls it “laddering”) of nominees were used at closings with the borrower such that there was no documentation protecting the investors as they had been promised in the trust document — the pooling and servicing agreement and the Prospectus distributed to prospective investors. Instead, like the “mismanagement” of the money, the documentation was also fraudulently diverted from the benefit of the investors and thus the promissory notes and mortgages (or deeds of trust in non-judicial states) were executed in favor of an entity controlled by the broker dealer — usually a new thinly capitalized entity (“originator”) that is currently no longer in business — that had did NOT make any loan to the borrower, nor did they cause any loan to be made to the borrower through any legal means. From the moment the borrower was tricked into signing documents at “closing” his title was clouded, there was no known party to whom payment could be sent to payoff the mortgage and receive a valid executed satisfaction or release of mortgage together with the return of the promissory note marked “canceled.”

This strawman at closing, called pretender lender, never receives delivery of the note, mortgage, closing documents or even wire transfer receipts from the closing with the borrower. The wire transfer is accompanied by wire transfer instructions that prohibit the escrow agent from delivering any overage to the stated (pretender) lender. The borrower is deceived, contrary to the requirements of Reg Z and TILA, into thinking that the lender is the payee on the note. In fact the lender is a group of investors. The broker dealer was acting, contrary to law, as a commercial bank (conduit) for the funding of the loan transaction.

Investors, insurers, guarantors and other third party co-obligors (unknown to the borrowers) have sued the broker dealers for committing fraud in two respects: (1) creating unenforceable loan documents and (2) mismanagement of money. Many other claims were made without suing. They have all been settled, some for large quantities of money that still represent a minute fraction of the money stolen from investors and compounded by wrongful foreclosure of property using unenforceable documentation corroborated by fabricated instruments and pursued at the behest of investment banks like Goldman Sachs when the borrowers could have entered into settlement, workouts, or modifications that would have protected the real parties interest (the investors and the borrowers).

Those investment banks have pretended to be the principals and have issued instructions to servicers to conclude as many of the loans as possible in foreclosure — an action that benefits the investment bank through closure, but harms the investor and the borrower.

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