Credit Default Swaps – The Ultimate Smoking Gun

Posted by revolt | Credit Default Swaps – The Ultimate Smoking Gun | Thursday 31 May 2012 3:43 pm

Credit Default Swaps – The Ultimate Smoking Gun

The latest and best information available to help stop illegal foreclosures is acquiring the Credit Default Swap information. The latest findings, (that are winning in court and are getting settlements) is the information discovered in what’s known as Credit Default Swaps.

You see, when Wall Street securitized loans…ANYONE (and I mean ANYONE) could buy an insurance policy against a loan in the event that that loan defaulted. Under a traditional insurance framework, only a party with a vested interest can buy an insurance policy, but this is not the case with a credit default swap.

Let’s say you own 1/100th of the loan (meaning you are one of 100 investors in the pool), you can buy a credit default swap policy for the full face value of the loan….such that in the event that the loan defaults, you get paid in full.

Let us repeat that in case you missed it!

Let’s say John Doe works at a fast food joint on a minimum wage…goes out and gets a loan for a $1 million dollars with no money down. The loan gets securitized and is sold to 100 investors. Let’s say ABC Bank is the originator and underwriter for the loan and is also one of those investors…in other words, ABC owns 1/100th of the $1M loan….ie. $10,000.

ABC takes out a Credit Default Swap insurance policy through AIG for the full $1M. Because ABC knows full well that John Doe is likely to default on the loan, it is in ABC’s interest to insure the loan against the default. Once John Doe defaults on the loan…ABC gets paid in full for the whole $1M.

This $1M goes to satisfy the loan in its entirety. In other words, the loan has been fully satisfied.
The debt has been paid in full. Yet…ABC continues to collect on the loan…and even goes to the extent of foreclosing on the homeowners.

Talk about “having your cake and eat it too”. How many times do these people need to be paid to satisfy their greed?! How many bail outs does it take before the people start saying “ENOUGH!”
What is increasingly being discovered is that, when homeowners go to court and present evidence that their loan has been fully satisfied and paid in full, the banks are backing off, and offering sizable settlements.

Of course banks do not want you to know this sort of information and have gone to great lengths to hide it from the public. However, our researchers recently gained access to a vast database of all Credit Default Swaps in the USA, and it is our belief that the vast amount securitized loans are subject to credit default swaps.

So if you are a homeowner facing foreclosure, this is another tool you might want to consider adding to your WEAPONS OF MASS DESTRUCTION arsenal.

Under the terms of the Deed of Trust, it says something like “upon complete satisfaction of the note, the lender/Trustee must reconvey the property back to the homeowner”. By this very definition, your loan has been satisfied and your lender does not have the right to foreclose on your loan.

Please forward this article to as many people as possible. Let’s wake up “WE THE PEOPLE” and fight this mortgage WAR to WIN!

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Video – Untangling Credit Default Swaps

Posted by revolt | Video - Untangling Credit Default Swaps | Thursday 31 May 2012 3:19 pm

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Massachusetts Sues 5 Major Banks Over Foreclosure Practices

Posted by revolt | Massachusetts Sues 5 Major Banks Over Foreclosure Practices | Thursday 31 May 2012 2:39 pm

By GRETCHEN MORGENSON

Published: December 1, 2011Top of Form

Massachusetts Sues 5 Major Banks Over Foreclosure Practices

By Gretchen Morgen December 2, 2011

Citing extensive abuses of troubled borrowers across Massachusetts, the state’s attorney general sued the nation’s five largest mortgage lenders on Thursday, seeking relief for consumers hurt by what she called unfair and deceptive business practices.

In addition to creating a new and significant legal headache for the banks named in the suit — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and GMAC Mortgage — the Massachusetts action diminishes the likelihood of a comprehensive settlement between the banks and federal and state officials to resolve foreclosure improprieties.

Also named as a defendant in the Massachusetts suit was the electronic mortgage registry known as MERS, an entity set up by lenders to speed property transfers by circumventing local land recording officials.

The attorney general, Martha Coakley, and her investigators contend that the banks improperly foreclosed on troubled borrowers by relying on fraudulent legal documentation or by failing to modify loans for homeowners after promising to do so. The suit also contends that the banks’ use of MERS “corrupted” the state’s public land recording system by not registering legal transfers properly.

“There is no question that the deceptive and unlawful conduct by Wall Street and the large banks played a central role in this crisis through predatory lending and securitization of those loans,” Ms. Coakley said at a news conference announcing the lawsuit. “The banks may think they are too big to fail or too big to care about the impact of their actions, but we believe they are not too big to have to obey the law.”

Ms. Coakley has been among the most aggressive state regulators in her pursuit of financial institutions involved in the credit crisis. In addition to her inquiry into foreclosure improprieties in Massachusetts, she has also conducted far-reaching investigations into predatory lending and securitization abuses.

Since 2009, Ms. Coakley has extracted more than $600 million in restitution and penalties from lawsuits against mortgage originators like Option One and Fremont Investment and Loan and Wall Street firms like Goldman Sachs and Morgan Stanley, which bundled loans into mortgage securities.

Officials at all of the banks issued statements saying they would fight the suit. Most of them also indicated dismay that Massachusetts had taken action during negotiations to reach a settlement over the types of practices highlighted in the case.

“We are disappointed that Massachusetts would take this action now,” said Tom Kelly, a Chase spokesman, “when negotiations are ongoing with the attorneys general and the federal government on a broader settlement that could bring immediate relief to Massachusetts borrowers rather than years of contested legal proceedings.”

Lawrence Grayson, a Bank of America spokesman, said: “We continue to believe that collaborative resolution rather than continued litigation will most quickly heal the housing market and help drive economic recovery.”

And Vickee Adams of Wells Fargo said, “Regrettably, the action announced in Massachusetts today will do little to help Massachusetts homeowners or the recovery of the housing economy in the Commonwealth.”

But as Ms. Coakley made clear during the news conference, her office had come to view as unacceptable the negotiating stance taken by the banks in the protracted settlement talks.

“When those negotiations began over a year ago, I was hopeful that we would be able to reach a strong and effective solution,” she said. “It is over a year later and I believe the banks have failed to offer meaningful relief to homeowners.”

Delaware, Nevada and New York have also objected to the direction the settlement negotiations were taking.

Kurt Eggert, a professor at Chapman University School of Law in California who is an expert in mortgages and securitization, said the Massachusetts lawsuit was a significant step because it opened the banks’ practices to far greater scrutiny than they had been subject to.

“So far the servicers have escaped any real review or punishment for their bad practices because federal regulators have by and large given them a pass on whether they followed the law in foreclosures,” Mr. Eggert said. “This lawsuit argues that they haven’t followed the law and that they can’t just fix all their problems after the fact.”

Among the misconduct cited in the Massachusetts complaint were 14 cases of foreclosures by institutions that had not shown proof that they had the legal right to seize the underlying properties when they did so. All the banks also deceived troubled borrowers, the complaint said, about the loan modification process. For example, some banks incorrectly advised borrowers that they would receive priority treatment if they were more than 90 days delinquent on their loans. Other borrowers were misled when told that they must be more than two months’ delinquent to receive a loan modification, it said.

Although Mr. Eggert said that the banks were likely to argue that a state like Massachusetts had no right to bring such a case against federally regulated institutions, he said that the Dodd-Frank legislation restricted the ability of federal authorities to bar states from acting in such cases.

“If the state can go forward and do real discovery, it will be the first time that anyone has really dug into the servicers’ files to see what they have done,” he added. “The feds conducted an investigation where they looked at very few files, and here the state could demand to see a lot.”

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California Passes Bills In Homeowner Bill of Rights package

Posted by revolt | California Passes Bills In Homeowner Bill of Rights package | Thursday 31 May 2012 2:30 pm

STATE: Legislature passes bills in California Homeowner Bill of Rights package

Thursday, 31 May 2012

California Attorney General Kamala D. Harris announced on Wednesday that the Assembly and Senate each passed important components of the California Homeowner Bill of Rights that will help protect homeowners from scams.

The bills enhance the attorney general’s enforcement powers and allow the attorney general to use special grand juries to prosecute multi-jurisdictional financial crimes.

The Mortgage Fraud Strike Force established by the attorney general has been investigating and prosecuting a wide range of crimes related to mortgages, foreclosures and real estate.

“California was the epicenter of the mortgage and foreclosure crisis and scammers have been preying on vulnerable citizens who simply want to keep their homes,” said Attorney General Harris. “These bills will aid our efforts to prosecute and convict these criminals.”

These are two of the six bills in the California Homeowner Bill of Rights. Other portions of the package are being considered in a Joint Legislative Conference Committee, including elements to restrict unnecessary foreclosures and protect the due process rights of borrowers and homeowners.

AB 1763 (Assemblymember Mike Davis, D-Los Angeles) and SB 1474 (Senator Loni Hancock, D-Berkeley) would allow the Attorney General to convene a special grand jury to investigate and indict the perpetrators of financial crimes involving victims in multiple jurisdictions. Both bills passed out of their respective houses unanimously with bipartisan support.

The special grand jury would convene in cases involving fraud or theft that occurs in more than one county and where all potential charges are against a single defendant or multiple defendants working together.

Crimes of a financial nature often occur in multiple jurisdictions. Under current law, crimes where the fraud victims are all over the state require separate grand juries and charges filed in each county where the defendant committed the crime. This legislation would provide for the option of a special grand jury that can investigate financial crimes beyond the scope of single-county grand juries.

“The attorney general is currently engaged in the investigation of significant crimes,” Senator Hancock said. “Unfortunately, county-by-county grand juries do not work well in dealing with large-scale wrongdoing in multiple jurisdictions. With this bill, the attorney general can investigate multijurisdictional crimes – it will provide protection when Californians need it the most.”

In addition, AB 1950, by Assembly member Davis, will extend to three years the statute of limitations on mortgage related crimes.

The current statute of limitations of one year can make it difficult to prosecute crimes such as the prohibition on charging up front fees for loan modification services.

Because the foreclosure process is so protracted, some homeowners may not even realize that they have been the victim of a scam before it is too late for prosecution.

“AB 1950 equips the Attorney General to do her job; to go after the bad actors that have taken advantage of homeowners. It accomplishes this by providing the Attorney General with appropriate time to investigate and prosecute those who prey on California homeowners,” said Assembly member Mike Davis. The bill passed out of the Assembly on a 46 to 18 vote.

The California Homeowner Bill of Rights also includes:

  • DUE PROCESS AND FORECLOSURE REDUCTION ACT: SB 900 (Leno) & AB 278 (Eng). These bills are being considered by a Joint Legislative Conference Committee.
  • BLIGHT PREVENTION LEGISLATION: AB 2314 (Carter) & SB 1472 (Pavley and DeSaulnier). These bills have passed the Assembly and Senate, respectively and now will be heard in the other house.
  • TENANT PROTECTION LEGISLATION: AB 2610 (Skinner) & SB 1473 (Hancock). These bills will be heard in the Assembly and Senate by the end of the week.

For more information on the California Homeowner Bill of Rights, go to www.oag.ca.gov

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California Homeowner in Foreclosure Wins Quiet Title – It’s a Free House!

California Homeowner in Foreclosure Wins Quiet Title – It’s a Free House!

Well, just when I thought I’d seen everything…

A Riverside, California homeowner, Denise Saluto, who was in foreclosure filed for quiet title against Deutsche Bank National Trust, as trustee for Long Beach Mortgage, and its successors and/or assigns, and Washington Mutual Bank, successor in interest to Long Beach Mortgage Company… and won by default. (And Washington Mutual, turned into JPMorgan Chase.)

That’s right… neither Deutsche Bank nor JPMorgan Chase responded to the lawsuit.

When this happens, the Plaintiff still has to present his or her case, but it’s unopposed so it’s not exactly the highest of hurdles. After considering the evidence presented by the Plaintiff, the court entered judgment in favor of Plaintiff and against the Defendants, thereby voiding her Trustee Sale and the Deed of Trust. So, presto-change-o… no more mortgage… as in… it’s a free and clear house! Ms. Saluto may still owe the debt, but the mortgage company is now like Visa or Mastercard, insecure because they’re unsecured. And no one wants to be unsecured, especially in bankruptcy court.

Now, some will say that Deutsche Bank/JPMorgan Chase didn’t respond because they just forgot or whatever, but I don’t know whether that’s the case or not. In fact, when their lawyer tried using this excuse, the judge was quick to point out that the file had been with the lawyer for NINE MONTHS before any efforts were made to get the default judgment set aside.

When a party loses by default like that, assuming it was an oversight of some kind, they usually appeal the decision as soon as they’re notified of the judgment by coming back into court to ask the judge to set aside the default judgment, claiming they weren’t properly served or something like that. And depending on the reason they defaulted, and almost certainly in the case of a bank and a foreclosure, the judge will set aside the default judgment and let the case start over.

As a matter of fact, if it’s within six months of the default, and the lawyer takes the blame, the court MUST vacate the default judgment. It’s actually the only time you ever get to see a lawyer willingly accept blame for anything.

So, in this case, as one would think, Deutsche Bank did appeal the decision, but the thing is, they waited almost a year to do so, in legalese… the bank, “failed to establish diligence in bringing their motion for relief.”

“On February 5, 2009, Saluto filed a complaint against JPMorgan Chase Bank and Deutsche Bank to set aside a trustee sale for violations of title 15 of the United States Code section 1601 et seq. and 12 Code of Federal Regulations part 226.1 et seq., to cancel the trustee deed upon sale, and for quiet title.

Defendants failed to respond to the complaint, and on March 16, 2009, Saluto served a request for entry of default on defendants. The next day, Saluto filed the proofs of service and the request for default with the trial court. The trial court entered default on each defendant on March 17, 2009.” An entry of default just means that the defendant cannot file a response. The Plaintiff still must file a “default judgment package,” which contains evidence supporting their claims.

In July 2009, Saluto filed a request for entry of default judgment, and on December 15, 2009, default judgments were entered.

Then… a year went by before…

“On June 15, 2010, defendants filed a motion to set aside the defaults and default judgments under section 473, subdivision (b), which allows relief from an action taken against a party through mistake, inadvertence, surprise, or excusable neglect when the motion for relief is made “within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken.”

To support the motion, defendants filed the declarations of their attorney, Jenny L. Merris; a vice-president of Deutsche Bank, Ronaldo Reyes; and a research analyst of JPMorgan Chase Bank, Harold Galo. The declarations stated that defendants had no record of receiving service and were not aware of the lawsuit until March 2010.”

So, on October 28, 2010, Judge Mark E. Johnson heard the banks’ motion.

At the hearing, Judge Johnson stated:

“I’m going to deny the motion. I do believe that I am outside of the six-month limit. . . . I also don’t see the due diligence. So if you want to re-bring it under [section] 473.5, I will look at that, but at least as to this ground I have before me, [section] 473 subdivision (b), I’m denying the motion.

On December 3, 2010, defendants filed a motion to set aside the defaults under section 473.5. Defendants submitted new declarations of Reyes, Galo, and Merris in support of the motion.”

Deutsche Bank claimed the bank had “no actual knowledge of this action until in or around early April 2010 when JPMorgan Chase Bank’s counsel informed it that Plaintiff had recorded the Default Court Judgment against this property.” Deutsche Bank’s declaration claimed, “This was the first time that Deutsche Bank became aware of the existence of this action.”

JPMorgan Chase claimed that it “had no actual knowledge of this action until on or around March 2010 when JPMorgan was informed that Plaintiff was seeking to refinance the property . . . and that Plaintiff had recorded the Default Court Judgment against this property.”

This time, Commissioner Barkley granted the motion brought by the banks thereby vacating the default judgment the Plaintiff had obtained about a year earlier. Saluto then appealed the decision to California’s Court of Appeals, Fourth District, Division Two, contending that the defendants’ motion under section 473.5 was, in essence, a motion for reconsideration, and defendants failed to comply with the procedural requirements of section 1008. (Don’t worry about section 1008 for a moment.) Saluto also argued that Commissioner Barkley simply got it wrong, and that the default judgment should have been upheld.

Now, this gets kind of technical, but Section 473.5 says that when service of a summons fails to result in actual notice to a defendant in time to defend the action… and therefore a default or default judgment is entered… the defendant may serve and file a notice of motion to set aside the default or default judgment and for leave to defend the action.

Section 473.5 says that the notice of motion has to be served and filed within a reasonable time, but not exceeding the earlier of two years after entry if a default judgment, or 180 days after service of a written notice that the default or default judgment has been entered.

Basically, because JPMorgan Chase Bank said it discovered the default in March 2010 and Deutsche Bank said it discovered the default in early April 2010, but they didn’t file their motion under section 473.5 until December 2010, the appeals court found no evidence that the two banks acted “diligently” in bringing their motion for relief under section 473.5, and therefore the trial court should not have granted the motion that set aside the default judgment.

As far as complying with the procedural requirements of section 1008, mentioned above, the court said the following…

“Because we have found reversible error based on defendants‟ failure to establish diligence in bringing their motion for relief, Saluto’s additional contentions are moot.”

So, that’s that for Denise Saluto… she won, quieted her title and now she has no mortgage on her home. She may still owe the money to some entity, but the debt is unsecured… like credit card debt… whatever she owes it’s no longer tied to her home.

Pretty amazing, right? If you would have asked me last week, I would have said there’s absolutely no chance that filing for quiet title will result in your loan being unsecured. And I would have been entirely wrong because Denise Saluto just did it.

And again… did it happen because Deutsche Bank and JPMorgan Chase somehow let this slip through the cracks? Maybe. Or, was it that the banks weren’t prepared to defend the quiet title action… as in, they couldn’t find the note, or the assignment was a forged and fraudulent mess.

Honestly, I have no idea what happened here, and I don’t think anyone else can know for sure either. All we can know is what happened.

So, what could happen next?

I started thinking about what could happen from here for Denise Saluto. Would she simply walk away with her free and clear home and that would be it? Or, would the banks have another move on the chessboard that would reverse the decision and cost Denise her home?

I called around to various lawyers and other experts, asking if the banks could somehow get the decision reversed? The answer: No. The decision by the Court of Appeal is essentially final. Sure, the California Supreme Court could overturn a decision by this court, but I’m told that the chances of that happening are so remote that it’s not worth considering.

So, there are no legal maneuvers that will change what’s happened, but I can’t believe that the bankers are just going to give up and go home on this either. Maybe they will, but maybe they won’t, right? So, what else could happen next to threaten the title to Denise’s home?

Ooops, we forgot… we sold it to someone else?

I’m not saying this is going to happen, but it occurred to me that a “new owner” of Denise’s note could show up on the scene with paperwork showing they bought it from the prior owner, either Deutsche Bank or JPMorgan Chase, before all this transpired.

You know, like a surprise owner that just happens to have appropriately dated paperwork showing that they are the owners of Denise’s loan and therefore the quiet title doesn’t apply… she’s behind on her payments, and therefore they are moving to foreclose.

Would this be fraud? I would certainly think so. Would that stop the bankers from doing it? I would certainly think not. And would it work and cause Denise to lose her home?

The lawyers, however, all tell me the answer is no. None of that would happen… it simply wouldn’t work.

So, Denise Saluto does now own her home free and clear. However, it seems very likely that she still owes the amount of her mortgage as an unsecured debt. Lawyers have told me that she could potentially have the debt discharged in a Chapter 7 bankruptcy, but it would depend on a few things lining up just right, including the value of her home being less than the homestead exemption.

In general, a judgment creditor cannot force the sale of your home unless your home can be sold for an amount that would satisfy all superior liens PLUS the amount of your homestead exemption. It looks to me like equity of up to $75,000 is exempt if you’re under 65 years of age, and $150,000 if over 65, and if you’re married it’s higher still.

But, as with everything having to do with the law, there are plenty of caveats, limitations and nuances. I found many of them in the California Code of Civil Procedure Section 704.730, but as always, check with an attorney before assuming anything because my experience has been that just because it says one thing doesn’t mean that it doesn’t mean another.

Okay, so what does this mean to me?

Well, in my opinion… that’s an interesting question.

For one thing, filing quiet title did work out well for Denise Saluto, and since I would never have predicted it happening in her case, I’m certainly not going to tell you it won’t happen again in yours, because as I said earlier… I don’t know why it happened. It might have slipped through cracks, or might have been caused by other factors.

Ever since yesterday when I started reading the decision by the California Court of Appeal, I’ve been trying to come up with a reason not to file one myself.

The lawyers I spoke with all told me that you have to have legitimate doubt about who holds title to your home, or else you’d be filing fraudulently, but I don’t see that as being a problem for me or anyone else in this country whose been paying attention to the news these last few years.

I mean, since I do know that Mickey Mouse has been signing the Assignment of the Deed of Trust in most cases, and Donald Duck has been notarizing it, and since the President of the United States recently told the country that there have been thousands of fraudulent foreclosures, and with countless lawsuits alleging that Mortgage-backed securities are in fact, less filling, as opposed to tasting great… let’s just say that I would not want to be asked under oath who owns my note.

As far as my having legitimate doubts as to the holder of title to my home, I could assure any court under oath that when it comes to my hizzle, my doubt is rizzle… it’s legit. Word.

(That was me trying to be “hip,” but let’s not tell my daughter because she will be so embarrassed.)

By Mandelman

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