From the Ticker…
The “Nothingburger” Defense Gets Destroyed
Janet Tavakoli: This is the biggest fraud in the history of the capital markets. And it’s not something that happened last week. It happened when these loans were originated, in some cases years ago. Loans have representations and warranties that have to be met. In the past, you had a certain period of time, 60 to 90 days, where you sort through these loans and, if they’re bad, you kick them back. If the documentation wasn’t correct, you’d kick it back. If you found the incomes of the buyers had been overstated, or the houses had been appraised at twice their worth, you’d kick it back. But that didn’t happen here. And it turned out there were loan files that were missing required documentation. Part of putting the deal together is that the securitization professional, and in this case that’s banks like Goldman Sachs and JP Morgan, has to watch for this stuff. It’s called perfecting the security interest, and it’s not optional.
Now you getting it folks?
This is NOT a “minor clerical error.”
It is NOT correctable at this point in time.
These securities are FATALLY DEFECTIVE. The parties with the legal duty to check these facts did not do so.
It gets worse.
Most people don’t understand that these securities were (and are) typically “sold forward.”
That is, the bank doesn’t take its own money, loan it to homebuyers, and then take the notes and securitize them, selling the pieces to recover its money.
No, what happened then (and still does today) is that these MBS are sold first and filled after!
That is, a pension fund calls up Vampire Squid Bank and says “I need $100 million of MBS that pay a 5% coupon.”
Vampire Squid Bank takes the $100 million dollars and then proceeds to securitize loans.
But in doing so it took the $100 million on a prospective pooling and servicing agreement in which they agreed to provide loans of a certain credit quality and specification to the buyer.
So it’s much worse than “we didn’t know.” It’s “we took the money, then we build the security and didn’t look, even though we told you we would.”
There’s no fix for this without something like an RTC structure. You have to put these loans back on the securitizers, and let them (if they can) stick them back on the originators.
If this blows up the big banks (and it will) then use Dodd-Frank’s “Resolution Authority” and take them into receivership and resolve them.
I’ve been pounding the table on this for three years. Everyone wants to make this sound “complex.” It’s not, as Janet described. It’s actually quite simple – the investors were swindled. Period.
Just like they were in the 1990s by the exact same scam, but in a different sector.
“It’s actually quite simple – the investors were swindled. Period.”
As were the homeowners…
Can’t defraud one without the other…
Got it?
~
Only a fool or a member of the republican tea party would not be able to understand this by now………at this time…………with the information you pros have taught us. The intelligent enemy……..the crooks and the greedy ones who are looking the other way exclaiming DEADBEAT………. all I can say is………… FU-K YOU TOO!
Its about time some of this is being brought to the light. It goes so much deeper than the surface of the deception. The fdIC did several studies (oh they get all the info from lps and equitfax (oh they make our credit scores too) oh and the MLS …look deep into LPS and its sub-SIN-eraries … the study detailed the untapped underbanked market and they deducted or realized how lucurative it could be. Low and behold, the product that destroyed america!! Yes it already is destroy -it too may implode on itself like the world trade center …bin and george are together somewhere i swear- anyway, If thats not an intent to defraud i dont know what is.
Also, is it really true about the 2 something million not to investigate? Whoever took deal and dismall amount has no right to take that as a bribe for all of us. Thats not going to help any of us -they put that much in on FEES… that person or people or committe or who ever. The system is rotten and milignant -they should BE INVESTIGATED too- you dont settle a billion dollar scheme of massive fraud for a few million bucks. As an american homeowner who was also so deceived – i paid over 300,000.00 in 3 yrs and it was going backwards…i now am digging further and further (im obsessed with researching the pools)like i just said, whoever decided that was okay needs to keep digging and give them their scrap back—it goes into the trillions. No amount of money should IMPEDE or OBSTRUCT that. What are we all thinking? Who made that decision…they should be fired and investigated. Dee
Dpreston@live.com
Keep digging people the abiss is deep….
Rule 10b-5 — Employment of Manipulative and Deceptive Devices
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
1. To employ any device, scheme, or artifice to defraud,
2. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
3. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
in connection with the purchase or sale of any security.
Okay… SO WHERE ARE THE INDICTMENTS???
The borrowers were also swindled. Banks are in the business of making good loans. A good loan is a loan likely to be repaid. Such a loan protects depositors and bank shareholders. Instead, banks made bad loans without disclosing to the borrower that the borrower could not afford the payment terms and conditions. No borrower went to a lender to obtain a loan which would self destruct in a few years.
Nonetheless lenders regularly made loans under false colors. The lenders failed to disclose that the loan would shortly result in default by the borrower and foreclosure. Accordingly, the lenders are also liable to borrowers for fraud and deceit. The bank had, at minimum, a duty to disclose to the borrower that the loan would become unaffordable and cause a foreseeable default.
my partner took out a loan thru countrywide, paid on it 5.5 yrs , it was 30,000 after 5.5 yrs it was 27,000. now they are stealing our home. we our current on our main mortgage but he fell behind on this loan. he has a lawn service and he lost business. when the foreclosure began he spoke to bac home loans and they said 5,000 would catch it up and pay the attorney fee so we wired it and then sent another 500. they took the money but now dont achknowdge the money and are still foreclosuing on us. we have a court date now. they are stealing our home, we have been in it 8 yrs and its a 20 yr fixed .so when we can now start paying the principle down and there is equity in our home . its in a very nice location with acreage , now they are stealing it from us. and we paid 50,000 down on the home. this year it fell under what we paid for it. thank you everyone is is disclosing the fraud of these banksters. I just hope we can save our home , that we have enough time. thanks all !!!
50 – 80% of loans in this pool were defective?
http://subprimeshakeout.blogspot.com/2010/09/inside-mortgage-finance-sees-private.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheSubprimeShakeout+%28The+Subprime+Shakeout%29
Finally… One of Geither’s early moves was to create a digital registry of CDO’s because the work — in the mid 200’s! — was being done by fax. Banks were taking weeks to process the faxes and by the time they were finished it was not uncommon for the CDO’s to be sold.
Why does this matter? Because that’s who paid for your mortgage .. before they were repaid by Treasury. Why would Geither care about electronically clearing paperwork faster? Because he knew, years before this was going to blow up, that banks were not slotting the “assets” (read: your house; where you and your children sleep) into the pools.
This isn’t a “technical” mistake; it’s wholesale fraud, and it isn’t even an especially hidden one either; the financial publications have been writing about it for years, though typically in obscure publications or using language (or numbers) tough to slog through. It means the same thing though: reckless, irresponsible, dishonest bankers wrote loans they knew could not and would not be repaid, then sliced and diced them so much that the processed version — the “derivative,” using their terminology — didn’t resemble where it came from.
Why does this matter? Because there’s a fine chance the “bank” suing you — or even the bank you’ve been paying for those still current — has little or even nothing to do with whomever lent money for your house. Who does? This is where it gets really interesting … they’re not sure; they’d prefer that you don’t ask, if you do ask they’ll just brush you off or confuse you (ex: holding companies with the same or similar names to banks but that are legally and financially completely separate). I’m beginning to think that they’re not even sure themselves, which makes it kinda’ hard to sign affidavits in good faith about being a lender, doesn’t it?