Feb 12, 2021
The nation’s biggest banks are reporting lower and lower volumes of loans from their own balance sheet — just as I predicted 14 years ago. The latest article is by Shahien Nasiripour of Bloomberg and reprinted by Washington Post. The dots are not being connected. Why should they loan off their balance sheet when they can make far higher profits using OPM (Other People’s Money).
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They have successfully transferred all lender risk to investors, who still have not read the fine print, and to homeowners and consumers, who have no real choice in the marketplace. The investors don’t get to own any “loans” and the “borrowers” end up with no lender, no creditor, no investor, and no loan account. Check it out. In doing so they avoid, on its face, all regulation of lending and securities sales.
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This created a substantial transactional risk to investors and homeowners and epic systemic risk to the entire financial system costing the government trillions of dollars as we saw in 2008-2010. The bailout, purchase programs for “mortgage bonds” (unsecured certificates) failed to cover any losses because the recipients had no losses. The recipients of such programs received disguised revenue while the losers were left with mounting losses that resulted in the loss of homes and loss of pensions. Taxpayers and the government are still bailing out nonexistent losses.
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I’ve reviewed tens of thousands of cases and I have been lead trial counsel in many cases defending homeowners in foreclosure. I won nearly all cases — even those in which I was only a consultant — based on one premise: if challenged. the claimant’s attorneys could not come up with one shred of evidence to support the existence, ownership, or authority over the alleged underlying
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When the transaction is commenced it is even possible that no funding at all occurs if the transaction is falsely billed as a “refinance.” The consumer is steered into a broker who in turn is steered to a “lender” that is acting as a sham conduit for the bookrunner manager Underwriter” (actually “issuer) of securities that are sold as AAA promises to pay periodic payments. The Payor on those certificates is the investment bank doing business as a trust that has no legal existence. The promise, when your dead the fine print is in the sole discretion of the investment bank.
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The reality of the consumer transaction is that the consumer is paid for services rendered, to wit: issuing a note and mortgage along with their consent to use their personal reputation. Then because the consumer believes it is a loan, they issue the note and mortgage with the intent of acquiring a loan agreement. But they are really returning the consideration paid for their services.
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So with that game why would anyone issue a loan of money from their own balance sheet? Under the current false claims of securitization (the debt is never sold much less divided into shares) all participants get guaranteed fees far in excess of any amount they ever received under conventional loans.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial and appellate 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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