Some excerpts from the report…
The first sign of what would ultimately become a $3 billion fraud surfaced Jan. 11, 2000, when Fannie Mae executive Samuel Smith discovered Taylor, Bean & Whitaker Mortgage Corp. sold him a loan owned by someone else.
Fannie Mae, the government-sponsored enterprise which issues almost half of all mortgage-backed securities, determined over the next two years that more than 200 loans acquired from Taylor Bean were bogus, non-performing or lacked critical components such as mortgage insurance.
That might have been the end of Taylor Bean and its chairman and principal owner, Lee Farkas. He is scheduled to be sentenced today in federal court in Alexandria, Virginia, for orchestrating what prosecutors call one of the “largest bank fraud schemes in this country’s history.”
Instead, it was just the beginning.
Fannie Mae officials never reported the fraud to law enforcement or anyone outside the company. Internal memos, court papers, and public testimony show it sought only to rid itself of liabilities and cut ties with a mortgage firm selling loans “that had no value,” as Smith, the former vice president of Fannie Mae’s single family operations, said in a 2008 deposition.
Taylor Bean would have collapsed in 2002 “but for the fraud scheme,” according to prosecutors. It also survived because Freddie Mac began picking up the company’s business within a week of Fannie Mae’s cutoff, Jason Moore, Taylor Bean’s former chief operating officer, said in an interview.
Freddie Mac soon became Taylor Bean’s biggest customer, and the mortgage company grew to be one of its biggest revenue producers, accounting for about 2 percent of single-family home mortgages by volume in 2009, according to a company filing.
From 2002 through August 2009, he directed the sale of more than $1.5 billion in fake mortgage assets to Colonial Bank and misappropriated more than $1.5 billion from Ocala Funding LLC, a financing vehicle used and controlled by Taylor Bean, prosecutors said in a sentencing document.
Farkas, 58, oversaw the “triple-selling” of $900 million worth of mortgage loans to Colonial, Ocala Funding and Freddie Mac, and led an effort to obtain $553 million from TARP, according to the filing.
On April 1, 2002, Fannie Mae management decided to terminate its contract with Taylor Bean because of “fraudulent loans” and “other serious concerns,” according to the summary document. In addition to the $1.7 billion servicing portfolio, Taylor Bean had an outstanding balance on Fannie Mae’s advance payment line of about $189 million, according to the document.
At that point, the chronology stated, Fannie Mae could have refused to buy any more loans from Taylor Bean, blocked the company’s access to its online loan processing programs, and seized the servicing rights, shifting those contracts to another company without compensating Taylor Bean.
It did none of those things. Fannie Mae wanted to preserve the value of the servicing portfolio, which would plummet if it reported that Taylor Bean was selling bogus loans, according to the summary document and Smith’s deposition.
Fannie Mae’s fraud department looked at $1 billion in suspect loans in 2009 and found $650 million to be fraudulent, according to William H. Brewster, director of Fannie Mae’s mortgage fraud program. Brewster told the Financial Crisis Inquiry Commission that the loans were bought from lenders such as Bank of America Corp. (BAC), Countrywide Financial Corp., Citigroup Inc. and JPMorgan Chase & Co.
Above article can be read in full here…
From a post on www.4closureFraud.org from last year…
Freddie Mac / Bank of America / Taylor Bean Whitaker – IMPORTANT INFO & STATEMENT REGARDING ASSIGNMENTS… TRANSFERS… NOTE OWNERSHIP!!!
“Indeed, it appears as though many loans and other mortgage-related assets have been double and even triple-pledged to various constituencies”
In the 1999 21st Century Loan Sharks Report, Nye Lavalle coined and defined the term “Predatory Mortgage Securitization” (see http://en.wikipedia.org/wiki/Predatory_mortgage_securitization) in his report from HIS PERSONAL RESEARCH AND ANALYSIS HE DEFINED SOME THE FOLLOWING PRACTICES THAT DEFINED Predatory Mortgage Securitization….
- Securitizations that are termed and classified as ‚whole loan‚ and ‚true‚ sales ‚ without recourse, that are really financing mechanisms with undocumented side deals and agreements for recourse which may not be able to be classified as investments in real estate and may have tax and reporting consequences for purchasers;
- Stamping, filing and recording loan and mortgage instruments that indicate loan was sold ‚ without recourse‚ when in fact there were recourse provisions;
- Failing to record in country records the true and real ownership, assignment and endorsements of promissory notes, deeds and other mortgage documents which were part of sale, assignment or transfer;
- Knowingly accepting via computer tapes the principal balances of loans offered for securitization when the servicers, investment bank or securitizer has knowledge that problems or potential fraud existed in the servicing operation of the bank, servicer, broker originating, selling, assigning or transferring the loan;
- Knowingly accepting via computer tapes the principal balances of loans offered for securitization when the servicers, investment bank or securitizer has knowledge that problems or potential fraud existed in the servicing operation of the bank, servicer, broker originating, selling, assigning or transferring the loan and the new owners, servicer and assignee securitizing the loan pool does not possess the full and complete loan transaction histories for each borrower;
- Knowingly accepting loans and not disclosing to investors problems with loan documentation; missing, altered or fraudulent documentation in loan file; chain of titles and ownership; threatened legal actions; current regulatory actions or complaints made about loans assigned;
- Reporting problems or improper custody, maintenance and control of promissory notes, deeds and other loan documents;
- Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the servicer or securitizer does not have a real interest in;
- Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the servicer or securitizer does not have in their custody or control;
- Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the servicer or securitizer has offered for sale to someone else;
- Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the servicer or securitizer is owned by someone other than party identified in the prospectus;
In essence on thousands of occasions Nye stated to regulators, CEOS, banks, Fannie and Freddie that the practices of the banks were that they were double and multi-pledging assets and pledging paid off and refinance notes to securitizations. This is something April, Max and Nye have discussed for years now. Now, they come and admit that each of my allegations were true Without analyzing the deal, as complex as they are, you WILL NEVER KNOW IF THE FORECLOSING PARTY HAS “ANY” RIGHT TO FORECLOSE!!!
Multi-pledge collateral (Notes) so as to cook the books;
In case of bankruptcy, allow the entity in possession of the notes to simply transfer to another entity to be decided or themselves the notes etc… so as to keep out of the bankruptcy estate of the bankrupt creditor;
To pretend to show that a “true sale” occurred when in reality the so-called lenders were financing their receivables;
Complete and change chains in titles to notes that were toxic where fraud was known and HDC could be achieved;
Shuffle the ball (note) under the shell (owner) so as to subvert TILA, RESPA, and FDCPA claims and other lawsuit claims and any related HDC and assignee liability issues.
Now, in BOA’s Motion in the TBW case, they prove his allegations that the notes were multi-pledged and his statement for years that unless you see where each note comes on and off the books, and review the custodial documents, you will NEVER KNOW WHO OWNS THE NOTE and has any right to accelerate, amend, modify, settle, payoff, satisfy, return, and cancel the note, let alone authority or standing to foreclose.
Here is the key part from the motion….
On numerous occasions, the Debtor has informed the Court and other parties in interest that one of the biggest challenges in this case will be sorting out the competing claims to cash and other assets that flowed through the Debtor‚Äôs accounts prior to the bankruptcy filing. Indeed, it appears as though many loans and other mortgage-related assets have been double and even triple-pledged to various constituencies. According to the Debtor, the largest single source of disputed funds‚Äîmore than $548 million according to the Debtor‚Äôs Second Interim Reconciliation Report‚Äîrelates to Freddie Mac. Indeed, BofA believes that there were improper diversions of Ocala loans and assets from TBW to Freddie Mac, and Ocala may have valid ownership claims with respect to a substantial portion of assets that relate to Freddie Mac. Accordingly, there can be little doubt that BofA, in its representative capacities with respect to Ocala, has a valid and pressing need for information regarding Freddie Mac‚Äôs extensive relationship with the Debtor, which is directly relevant and necessary to evaluate the Debtor‚Äôs property, liabilities, and financial condition. In just a few weeks, the Debtor intends to file an Asset Reconciliation Report that will identify with greater specificity (but, importantly, not resolve) the remaining issues with respect to ownership rights. As a result, the need for BofA to gain access to documents in Freddie Mac‚Äôs possession has become particularly urgent. Among other things, BofA needs to obtain documents from and examine witnesses at Freddie Mac to (1) evaluate competing claims against the estate, (2) test the assumptions contained in the Asset Reconciliation Report, and (3) examine Freddie Mac‚Äôs claim of ownership with respect to certain mortgage assets and its custodial arrangements with Colonial Bank for those assets. Despite these time sensitivities, Freddie Mac has so far blocked BofA‚Äôs ability to obtain any of this information, including those documents that have already been produced to the Debtor and counsel for the Committee. In its objection, Freddie Mac goes to great lengths to characterize the BofA 2004 Motion as overly burdensome, massively expensive, improperly motivated, and generally disruptive to the ongoing discovery between the Debtor and Freddie Mac. Even if such arguments had any merit under the circumstances (which they do not), the simple fact remains: nearly three months after the Court entered its order on the Debtor‚Äôs Rule 2004 motion authorizing and directing examination of Freddie Mac, BofA has not been able to review a single document…
Be sure to sift through the files below… Fascinating…