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Mortgage Backed Securities: the BIG Story the MSM is not shouting about!

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Author Topic: Mortgage Backed Securities: the BIG Story the MSM is not shouting about!  (Read 756 times)
citizenx
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« on: October 25, 2010, 06:32:54 pm »

One Mess That Can’t Be Papered Over

GRETCHEN MORGENSON, On Saturday October 23, 2010, 4:49 pm EDT

 
LAWYERS representing delinquent homeowners have been shouting for years about documentation problems in residential mortgages. Now that their complaints have gained traction with investors, attorneys general and some state court officials, the question of consequences looms large.

Is the banks’ sloppy paperwork a matter of simple technicalities that are relatively easy to cure, as the banks contend? Or are there more far-reaching consequences for banks and the institutions that bought mortgage-backed securities during the mania?

Oddly enough, the answer to both questions may be yes.

According to real estate lawyers, most banks that have gotten into trouble because they didn’t produce proper proof of ownership in foreclosure proceedings can probably cure these deficiencies. But doing so will be costly and time-consuming, requiring banks to comb through every mortgage assignment and secure proper signatures at each step of the way — and it surely will take much longer than a few weeks, as banks have contended.

continued:

http://finance.yahoo.com/news/One-Mess-That-Cant-Be-Papered-nytimes-2402457818.html?x=0

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« Reply #1 on: October 25, 2010, 07:08:43 pm »

The Daily Bail
National Debt & Deficit Portal. Bailout News. QE - The New American Bloodsport.

Oct252010
« William Black Calls On FDIC To Seize Bank Of America »


Updated:  Scroll down for VIDEO - Bill Black with Max Keiser.

---

This is a beauty.  Are you listening Sheila Bair.

Bill Black says that the FASB 157 Hour Of Power, and delusion, is over.  Banks are still insolvent.  The Fed is complicit.  Put the banks with the most fraud into government receivership, sack management teams, investigate, find the hidden balance sheet secrets, then prosecute.

"Foreclosure fraud is the only thing standing between banks and Armageddon.  The financial media treats Bank of America as if it were a legitimate bank rather than a "vector" spreading the mortgage fraud epidemic throughout much of the Western world."
---

By William K. Black

Foreclose on the Fraudsters, Part 1: Put Bank of America in Receivership

The lenders, officers, and professional that directed, participated in, and profited from the fraudulent loans and securities should be prevented from causing further damage to the victims of their frauds, through fraudulent foreclosures.

The banks that are foreclosing on fraudulently originated mortgages frequently cannot produce legitimate documents... Now, only fraud will let them take the homes. Many of the required documents do not exist, and those that do exist would provide proof of the fraud that was involved in loan origination, securitization, and marketing. This in turn would allow investors to force the banks to buy-back the fraudulent securities. In other words, to keep the investors at bay the foreclosing banks must manufacture fake documents.... Foreclosure fraud is the only thing standing between the banks and Armageddon.

continued:

http://dailybail.com/home/william-black-calls-on-fdic-to-seize-bank-of-america.html

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citizenx
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« Reply #2 on: October 25, 2010, 07:11:42 pm »

Title:    The Run Upon The Bankers
Author: Jonathan Swift

The Run Upon the Bankers[1]


The bold encroachers on the deep
Gain by degrees huge tracts of land,
Till Neptune, with one general sweep,
Turns all again to barren strand.

The multitude's capricious pranks
Are said to represent the seas,
Breaking the bankers and the banks,
Resume their own whene'er they please.

Money, the life-blood of the nation,
Corrupts and stagnates in the veins,
Unless a proper circulation
Its motion and its heat maintains.

Because 'tis lordly not to pay,
Quakers and aldermen in state,
Like peers, have levees every day
Of duns attending at their gate.

We want our money on the nail;
The banker's ruin'd if he pays:
They seem to act an ancient tale;
The birds are met to strip the jays.

"Riches," the wisest monarch sings,
"Make pinions for themselves to fly;"[2]
They fly like bats on parchment wings,
And geese their silver plumes supply.

No money left for squandering heirs!
Bills turn the lenders into debtors:
The wish of Nero[3] now is theirs,
"That they had never known their letters."

Conceive the works of midnight hags,
Tormenting fools behind their backs:
Thus bankers, o'er their bills and bags,
Sit squeezing images of wax.

Conceive the whole enchantment broke;
The witches left in open air,
With power no more than other folk,
Exposed with all their magic ware.

So powerful are a banker's bills,
Where creditors demand their due;
They break up counters, doors, and tills,
And leave the empty chests in view.

Thus when an earthquake lets in light
Upon the god of gold and hell,
Unable to endure the sight,
He hides within his darkest cell.

As when a conjurer takes a lease
From Satan for a term of years,
The tenant's in a dismal case,
Whene'er the bloody bond appears.

A baited banker thus desponds,
From his own hand foresees his fall,
They have his soul, who have his bonds;
'Tis like the writing on the wall.[4]

How will the caitiff wretch be scared,
When first he finds himself awake
At the last trumpet, unprepared,
And all his grand account to make!

For in that universal call,
Few bankers will to heaven be mounters;
They'll cry, "Ye shops, upon us fall!
Conceal and cover us, ye counters!"

When other hands the scales shall hold,
And they, in men's and angels' sight
Produced with all their bills and gold,
"Weigh'd in the balance and found light!"


[Footnote 1: This poem was printed some years ago, and it should seem, by the late failure of two bankers, to be somewhat prophetic. It was therefore thought fit to be reprinted.--_Dublin Edition_, 1734.]

[Footnote 2: Solomon, Proverbs, ch. xxiii, v. 5.]

[Footnote 3: Who, in his early days of empire, having to sign the sentence of a condemned criminal, exclaimed: "Quam vellem nescire litteras!" Suetonius, 10; and Seneca, "De Clementia,", cited by Montaigne, "De l'inconstance de nos actions."--_W. E. B._]

[Footnote 4: Daniel, ch. v, verses 25, 26, 27, 28.--_W. E. B._]




[The end]
Jonathan Swift's poem: Run Upon The Bankers

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« Reply #3 on: October 25, 2010, 07:22:14 pm »

A European Lynch Mob Is Coming For Bank of America

Oct. 25 2010 - 1:01 am | 7,566 views | 2 recommendations | 9 comments
By MATT SCHIFRIN

The BAC mess may be too much for Moynihan.

I pity CEO Brian Moynihan and the 284,000 other employees of Bank of America Corp (BAC).  That includes 15,000 Merrill Lynch brokers who are still recovering from the financial crisis and now have to explain to their clients why they work for a firm that is at the epicenter of America’s housing crisis.

Not only have they seen $80 billion in stock market value evaporate since April but they also have to suffer the humiliation of having a parent company bone-headed enough to pay $4 billion for Countrywide, the financial firm created by subprime mortgage pimp Angelo Mozilo. That mess could wind up costing BAC $50 billion, excluding legal fees and brand value deterioration. Remember Countrywide originated  $1.4 trillion in mortgages from 2005 to 2007 alone.

The latest ugly news for Bank of America is actually coming from Europe, where big institutional money managers and other mortgage securities buyers are now beginning to organize for an assault. This information comes from  John Mauldin’s, Thoughts from the Frontline Weekly Newsletter. His e-letter is a must-read for many money managers and serious investors.
This week he devotes a lot of his letter to testimony that seems to prove that big banks like Citigroup (C) and BAC were negligent and even willfully careless in underwriting subprime mortgages. He also reports on some new ominous developments brewing overseas and that law firm Quinn Emanuel Urquhart & Sullivan , which specializes in going after money center banks, has been hired by Fannie Mae and Freddie Mac parent, the FHFA. Below  is an excerpt of his newsletter, if you want the full version, click here.

continued:

http://blogs.forbes.com/schifrin/2010/10/25/a-european-lynch-mob-is-coming-for-bank-of-america/?boxes=financechannelforbes

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« Reply #4 on: October 25, 2010, 07:24:22 pm »

Mon, Oct 25 2010 at 11:54 am
Bair: Foreclosuregate Is A ****show


The Market Ticker

Hattip Zerohedge:

BAIR: LITIGATION FROM SERVICER ISSUES COULD BE `VERY DAMAGING’
BAIR SAYS FORECLOSURE PROBLEMS WILL REQUIRE `GLOBAL SOLUTION’
BAIR: CRISIS REQUIRES `DECISIVE’ ACTION FOR MORTGAGE SYSTEM
BAIR: FDIC SECURITIZATION RULES `CONSISTENT’ WITH DODD-FRANK
BAIR SAYS CRISIS REVEALED `CRITICAL FLAWS’ IN MORTGAGE FINANCE
No **** Sherlock.

Here’s reality:

Lots of notes appear to have never been conveyed. When the MBS holders get their landsharks into this, the servicers and securitizers are screwed. Got it?  Done, baked, cooked, finished.
The only “Global Solution” is to put the institutions that did this into recievership. Right now.  BEFORE the landsharks cause a VERY disorderly collapse. We have a resolution authority.  Use it.  These institutions must be forced to eat the crap that they foisted off on pension funds and insurance companies.  If they claimed they had original endorsed paper for each loan (and they all did) and did not that is black-letter fraud.  So is selling someone paper you claim is good when you know it is not, and again, we have under-oath testimony documenting that this was done willfully and intentionally. This is fraud in the inducement against MBS holders and those who committed it must be forced to eat the consequences.
The question of fraud in the inducement against borrowers must be answered to.  This is not a “technical matter.”  Citibank’s former chief underwriter has testified under oath that he, and the rest of management, knew that 60% of production was bogus in 2006 and 80% in 2007.  These loans are avoidable under long-existing law.  You cannot create a binding contract where you have reason to know that the other party cannot perform, and long-standing law codifies this officially in terms of debts and security instruments - giving someone a loan where they retain insufficient assets and income to pay as agreed renders the security of the instrument and thus the loan avoidable.  Period!
Dodd-Frank has a consistent procedure.

It’s called RESOLUTION and you need to employ it RIGHT NOW.


source:

http://www.themarketguardian.com/2010/10/bair-foreclosuregate-is-a-show/
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« Reply #5 on: October 25, 2010, 07:29:28 pm »

And the scope of this crisis is another 2 trillion possibly, assuming the taxpayers are on the hook once again following another round of bank bailouts (not unthinkable):

Foreclosuregate Fallout: How Bad Can It Get for Wall Street?

Wednesday 20 October 2010

by: Zach Carter  |  AlterNet | Report

Foreclosure fraud is ruffling a lot of feathers on Wall Street, and while the full scope of losses remains unclear, even major banks are now acknowledging that this is a multi-billion-dollar disaster, not just a set of minor paperwork headaches.

So how bad will it get for Wall Street? There are several disaster scenarios in which the housing market simply shuts down, where the potential losses for Wall Street are simply incalculable. But even situations that do not directly rip apart the basic functioning of the mortgage system could be enough to shut down one or more big banks, creating serious trouble for the financial system, and a major test of the recent Wall Street reform bill.

JPMorgan Chase loves using its research department to push its political agenda, and the bank is currently characterizing the foreclosure fraud outbreak as a set of “process-oriented problems that can be fixed.” That puts them in the rosy optimist camp for this crisis, and they’re projecting a total of $55 billion to $120 billion in losses for the entire industry, spread out over a few years.
But take a look at the analysts’ methodology. The actual scope of losses gets drastically larger if you just change a few arbitrary assumptions.

JPMorgan’s analysts look at about $6 trillion in mortgages issued between 2005 and 2007—this is the height of the bubble, but it excludes plenty of lousy loans issued in 2003, 2004 and 2008. They then estimate defaults of $2 trillion and losses of $1.1 trillion on those defaults.

continued:


http://www.truth-out.org/zach-carter-foreclosuregate-fallout-how-bad-can-it-get-for-wall-street64503?utm_source=twitterfeed&utm_medium=twitter
-----------------------------------------------------------------------------------------------------------------------------------------

BTW, 2 trillion USD (2,000,000 million) divided by 300 million men, women and children is 6,666.66$ a piece.
« Last Edit: October 25, 2010, 07:32:02 pm by citizenx » Report Spam   Logged
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« Reply #6 on: October 25, 2010, 07:45:46 pm »

Professors Black and Wray Confirm that Bear Pledged the Same Mortgage to Multiple Buyers

I have repeatedly pointed out that mortgages were pledged to multiple buyers at the same time. See this and this.

Today, in another must-read piece, economics professors William Black and L. Randall Wray confirm:


Several banks would go after the same homeowner, each claiming to hold the same mortgage (Bear sold the same mortgage over and over).
As USA Today pointed out in 2008, Bear was one of the big players in this area:


Bear Stearns was one of the biggest underwriters of complex investments linked to mortgages. Two of its hedge funds, heavily invested in subprime mortgages, folded in July.

***

Bear Stearns was linked to many other financial institutions, through the mortgage-backed securities it sponsored as well as through complex financial agreements called derivatives.
The Fed wasn't so much concerned that 85-year-old Bear Stearns would go bankrupt, but rather that it would take other companies down with it, causing a financial meltdown.


Alot of toxic mortgages and mortgage related assets ended up on the taxpayer's tab directly or indirectly.

continued:

http://www.washingtonsblog.com/2010/10/professors-black-and-wray-confirm-that.html
 
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« Reply #7 on: October 25, 2010, 10:10:44 pm »

The Perfect No-Prosecution Crime           

Greg Hunter
USAWatchdog.com
October 25, 2010

 
Did you know that in the aftermath of the Savings and Loan (Thrifts) scandal there were more than a thousand felony convictions of financial elites? The cost of the wrongdoing associated with the rip-off and closure of nearly 800 Thrifts cost taxpayers more than $160 billion. The current sub-prime/mortgage-backed security scandal is 40 times bigger according to Economics professor William Black. That means the size of the crime is $6.4 trillion by my calculation. Can you guess how many indictments there have been on financial elites who created this enormous mess? Zero, none, nada, zip. Yes, not one single prosecution or conviction has been started of achieved.



That is simply outrageous considering the width and breadth of the many crimes committed. There was “rampant” mortgage fraud in the loan application process according to the FBI as far back as 2004. (Click here to see one of many stories of the FBI warning of mortgage fraud) There was real estate document fraud when the original Promissory Notes and loan documents were “lost.” The Promissory Notes were required to create tens of thousands of mortgage-backed securities (MBS). No “note,” no security. That is security fraud. No security means the special IRS tax treatments for the MBS’s were fraudulently obtained. That is IRS tax fraud. Because there were no documents, the rating agencies fraudulently made up triple “A” ratings for the securities. When the whole mess blew up, big banks hired foreclosure mill law firms to create forged documents. That phony paperwork was and is being used to wrongfully remove homeowners from their property. That is foreclosure fraud.

http://www.infowars.com/the-perfect-no-prosecution-crime/
------------------------------------------------------------------

from infowars today!

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« Reply #8 on: October 26, 2010, 03:46:36 pm »

How Did the Banks Get Away With Pledging Mortgages to Multiple Buyers?        

Washington’s Blog
Oct 27, 2010

I’ve repeatedly documented that mortgages were pledged multiple times to different buyers. See this, this and this.

In response, some people (including one of the country’s top bankruptcy lawyers) have told me they don’t buy it.

Specifically, they ask such questions as:

With a mortgage sold to two different entities, wouldn’t the income from the mortgage be shown on the books of both entities?
Was the interest/principal payments that were made by the homeowner before they stopped being divided between both entities? If so, wouldn’t this have rung alarm bells immediately?
If only one was getting it, why didn’t the other entity immediately try to foreclose?
If there was one servicer involved, was the servicer covering the difference between what was collected and the payments actually made? If so, how did the servicer do this and still remain in business?
If two servicers were involved, why didn’t this come out sooner or were both servicers hiding this fraud?
So I wrote to some of the leading experts on mortgage fraud – L. Randall Wray (economics professor), Christopher Whalen (banking expert with Institutional Risk Analytics), and William K. Black (professor of economics and law, and the senior regulator during the S & L crisis) – to seek their insight.

Chris Whalen told me:

All good points, but the short answer is that nobody may have noticed until now. The issue of substitution and other games played by servicers makes exact tracking of loans problematic. It should show up in the servicers reports and should be caught, but there are a lot of things that go on in loan servicing that nobody talks about. Until about 2006, the GSEs and banks would advance cash and would substitute, but not now. The noble practitioners you heard from are all sincere and want to believe in intelligent design.

Having A Supply Of Healthy Foods That Last Just Makes Sense (AD)



Whalen explained:

Prior to FAS [i.e. Financial Accounting Standards] 166/167, a defaulted loan might sit in a FNM/FRE pool for up to a year before the default was removed from the trust. The issuer would then place a new loan into the pool or “substitute” for the old loan. No purchase event was booked. The investor would never know. In fact, the issuer would keep paying interest on the original principal amount in those days. Now under FAS 166/167, the issuer must immediately repurchase the defaulted loan and take the loss less estimated recovery. That is why the pace picked up this year when it comes to repurchase demands.

You should refer your dubious and very naive friends to the case of National Bank of Keystone, WV. One of the worst failures per $ of assets in FDIC history. The management hid a Ponzi scheme in the loan servicing area for five years. Paid interest to investors with their own principal. Two auditors missed the fraud and later were sued by the FDIC acting as receiver for the dead bank. And this was a small operation. The big five are an even worse mess. Remember, when the seller of a loan and the servicer are the same, anything can happen. And it usually does.

Professor Black told me:

Double pledges (as they’re typically called, though one could pledge multiple times) are a well known fraud device. It is correct that one of the key purposes of adopting Article 9 of the Uniform Commercial Code (UCC) was to reduce the risk and frequency of this form of fraud. So, double pledges in the modern era require both (A) fraud (on the part of the borrower or purchaser) and incompetence, indifference, or corruption on the part of the original secured lender or their agents if the borrower is the fraudster or the purchasers if they are the fraudsters.

The two potential sources of fraud: A fraudulent borrower could pledge the same home as security for multiple mortgage loans. Title checks, by the lender/title insurer are so easy to conduct and so vital to protect the lender that this form of fraud is vanishingly rare. Alternatively, and far more likely, the lender could sell the mortgage to multiple buyers. Those buyers could have far lower incentives to check on prior pledges and less ability to check for prior pledges. The entity selling a loan to multiple parties (A) has a compelling incentive to hide the prior pledge(s), (B) is financially sophisticated, and
therefore more capable of deception than a homeowner, and (C) can pick who to make the multiple sales to — allowing them to select the most vulnerable targets for fraud.

Subpart (C) provides the logical transition to the second requisite for multiple pledge frauds — vulnerable victims. The characteristics they would exhibit include (A) growing massively, (B) purchasing nonprime loans without fully underwriting the quality of the loans (and quality in this context inherently requires superb “paperwork”), (C) poor internal and external controls, and (D) opaque systems that make it extremely difficult to determine the beneficial owner and locate key mortgage documents that would reveal multiple sales. Unfortunately, these four characteristics were characteristic of many purchasers of nonprime mortgages. That is why I have long stated that the process was dominated by the financial sector equivalent of “don’t ask; don’t tell.”

Bottom line: the elite bankers and the anti-regulators have been so unwilling to
find the truth that no one knows how bad these frauds became. Finding the facts
is essential and can and should be done by reviewing samples of the loans pledged or sold to Fannie and Freddie and the Fed.

And professor Wray told me that record-keeping by servicers was terrible, and pointed me to the following article from the Tampa Tribune:

Peter Bakowski, a 58-year-old former Tampa mortgage broker, has admitted orchestrating a Ponzi scheme that involved more than 30 investors and institutions and more than 150 deals, documents show.

***

Bakowski sold the mortgage assignments to multiple investors, promising high rates of return and using all the money he generated to “keep the scheme afloat,” according to his plea agreement.

source:

http://www.prisonplanet.com/how-did-the-banks-get-away-with-pledging-mortgages-to-multiple-buyers.html

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