Dan Edstrom, senior forensic analyst for LivingLies has issued the following message that I think is worth reading. Perhaps the biggest point is that the interests of the servicer are opposite to the interests of the alleged creditor. It seems increasingly obvious that these servicers have no legal authority to collect any payments much less enforce them. Further, it is increasingly apparent that the “creditor” (frequently named as plaintiff in foreclosure lawsuits or beneficiary in non-judicial sales) actually has no loss and no default on the books of the creditor.
The trick here is that the servicer comes to court with the borrower’s payment records. But they don’t come to court with the records of the creditor because those would show receipt of payments. And when challenged to produce their own records as to what they did with borrower’s payments, they continue to stonewall. Every borrower has a right to know whether his payments were turned over to an alleged creditor. So the servicer ought to be compelled to produce those records of the servicer. If payments continued to the creditor after the borrower stopped making payments, then the real lawsuit should be by the servicer against the borrower for unjust enrichment — a lawsuit in equity that creates an unsecured claim unrelated to the mortgage or deed of trust.
My conclusion is that these foreclosures are actions by and for the benefit of the servicer and NOT for the benefit of the alleged creditor (Trust). And the fact that a GSE (Fannie, Freddie) has purchased the loan at some point does not make the loan documents correct.
The chain frequently starts with an originator who never funded the loan. In my opinion this means that no loan contract was consummated — having vast implications for enforcement, ownership and balance. It is highly probable that most of what the GSEs have “purchased” has been empty paper in which fictional sham characters were involved. The loans might just as well have named Donald Duck as the lender. Such paper should never have been released by the closing agent, much less recorded.
There is no substitute for 8 years of experience with these issues, which while convoluted are not impenetrable to people like Dan.
From Dan Edstrom —
Note that there are numerous reasons for selling non-performing loans back to the GSE’s:
- Improve operating margins
- improve liquidity
- Reduce [current] servicing advances [that cannot be financed]
- Recover more than $150 million in [past] servicing advances
Note that in all of these Ocwen is referencing (1) nonperforming loans and (2) advances related to nonperforming loans.Ocwen is attempting to rid themselves of their own undertakings and obligations related to nonperforming loans, which is, among other things, to provide the “creditor” with the payments of principal and/or interest in order that the loans PERFORM for the creditor.The loans are only nonperforming based on Ocwen’s side of the transaction. To the creditor these loans are performing loans. (e.s.)
Once the GSE’s purchase the loans, they repay Ocwen the servicing advances. But note that the GSE’s are not the actual creditors. The GSE’s are acting in multiple capacities:
- Trustee for the “trust” that sold securities to investors
- Master Servicer (essentially they farmed out the servicing responsibilities to Ocwen)
- Guarantor (the GSE’s offer a guarantee of principal and/or interest to investors who purchased securities). This guaranty is a corporate guarantee from Freddie and Fannie.
Is Ocwen considered a creditor to the homeowners? I don’t think so as Ocwen is a non-contract party. Any payments advanced by Ocwen are not from the creditor.Thx,Office: 916.207.6706
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