Posts Tagged ‘Class Action Lawsuit’

The Securitization and Foreclosure Coverup by The Big Banks

Step1. Homeowner receives loan from Bank-X. Step2. Bank-X sells the loan to SPV and is paid in full. Step3. SPV transfers note into REMIC trust and is paid in full by Trustees. Step4. The note is now a Security, the process is irreversible and complete. Step5. Investors (OWNERS) of the Certificates (Bonds/Stocks) receive payment from the REMIC Trust.

Newscast Media HOUSTON, Texas–The process of acquiring or selling homes in the past few years has been forever changed by the securitization process that has affected homes of over 60 million Americans. I receive many emails and questions regarding this topic, and since I am not an attorney, I will direct the readers to a brilliantly written article by Rodaben Esquire, that explains the whole process and by the end of the article, you’ll be surprised as to what the banks are hiding from you. I have also created the chart above to show you the flow of transactions.

Understanding Securitization and Foreclosure:

Bank A issues a mortgage to Caprice to purchase a house. Two documents are produced, a promissory note and a trust deed. The trust deed is essentially the title of the property that is held in trust until the promise to repay the loan (promissory note) is satisfied. Once the loan is paid in full Bank A releases its claim on the Trust deed and ownership passes in full to Caprice. That is what most of us believe happens in mortgages because you are not informed as to what happens after the paperwork is signed and how it impacts the title and promissory note you are obligated to. This is intentional, and represents the entire scheme that allows securitization occur. If the process that is now used is too complex it can be used as a justification to allow the shenanigans that occur during a foreclosure process to happen while the judges and juries believe that the process described above is what is actually happening. Lets look next at the basics of securitization.

Once the mortgage has been formed between Caprice and Bank A, Bank A wants to get rid of it as fast as possible and recoup its funds. To take advantage of this and the tax benefits of securitization it has to form what is called an SPV, a (Special Purpose Vehicle) Think of it as a shell company. This protects the mortgage if something happened and Bank A went out of business. The mortgage would still exist. It also theoretically reduces the liability of Bank A to the mortgage default. It is important to realize one important thing here…the two documents that Caprice signed (the promissory note and the title deed) are now SEPARATED. The trust deed remains with its trustee. The promissory note—the asset that pays money—is SOLD to the SPV. The original note is paid off by the SPV and the stream of payments becomes the property of the SPV. Bank A has its money in full and no longer has ANY interest in the mortgage.

Now, the SPV forms a new trust entity. This trust entity is defined by the IRS as a REMIC (Real Estate Mortgage Investment Conduit) and must adhere to the laws regarding such a trust. The benefit of doing this is that when the SPV transfers the mortgages into the Trust NO TAXES MUST BE PAID ON THE TRANSFER. This makes the trust is a much more efficient and profitable vehicle for investors. REMICs, in turn, cannot retain any ownership interest in any of the underlying mortgages. The Trust, then, is as its name states a Conduit where money flows in from the person who pays their mortgage and out to the investor as a payment. The right to receive those payments was purchased when the security (stock or bond) to the trust was purchased. Proceeds from that went back to the SPV who used them to purchase the mortgages from Bank A. It is a giant figure 8 circular flow of money with the Trustee coordinating it all.

Lets see who OWNS the mortgage then:

The first owner was Bank A who took interest in the property as collateral on its loan to Caprice. Simple enough. When Bank A sold the mortgage to the SPV its interest was extinguished. Ownership of the promissory note WAS transferred to the SPV who is now the note holder. The SPV forms the REMIC trust and transfers the note into the trust, thereafter it irrevocably changes the nature of Caprice’s mortgage. It becomes a Security. Once again, the SPV must transfer the note and pay taxes on the transfer. The mortgage now in the trust becomes for all purposes a blended group of monthly payments. These payment streams become the source of funds that the trustee pays out to investors. In essence the trustee—when certificates, stocks or bonds to the trust are sold—sells a beneficial interest in the mortgage. That is not ownership of any portion or any segment of the revenue stream but rather is simply a security—just like a share of IBM or Google doesn’t entitle you to any of the assets of the company. But who owns the note?

Because of the tax exemption of the REMIC it is PROHIBITED from retaining any ownership of the underlying assets it no longer holds any ownership to the note on the day it is formed. The investors in the trust do not hold any interest in the note either, they only hold the security which was sold to them. So what happened to ownership of the note? It was EXTINGUISHED when it entered into the trust in order to obtain the flow of cash back to the original lender and the tax-preferred investment proceeds to the investors. So, who does Caprice owe the money to? Who has authority to release the deed to Caprice when her mortgage has been satisfied? The answer? No one.

The trust is set up and cannot take an active role in the collection of the funds. It is a shell entity ONLY. Therefore it appoints a servicer to collect the payments every month. So what happens when Caprice defaults? How is his property foreclosed upon?

In this proceeding the servicer presents documents to the court (or the trustee of the deed in a non-judicial foreclosure state) that state that THEY are the owner of the note and have a legal standing to foreclose. This is not true, is not legally possible, and is fraudulent. The servicer is the agent of the Trust and will use that to claim that they are foreclosing on behalf of the trust. The problem? The Trust itself cannot hold ownership of the note because of its tax-preferred REMIC status! What about if they state that they are representatives of the investors? The investors have no ownership interest in the underlying mortgages, they only have ownership interest in the securities that were issued to fund the trust! So who does Caprice owe? The answer is nobody. The process of a note becoming a Security is final and irreversible. You cannot unscramble the eggs. A Security cannot be used to foreclose. The Kansas Federal Court Ruling decided once a note was securitized it was no longer a note and would NEVER be a note again. It becomes a Security. (Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834.)

Bottom Line -All Terms of Your Mortgage Were Fulfilled:

The Lender was paid from the SPV upon selling the note.

The SPV was paid from the Trustee who received money from the sale of securities.

The Servicer was paid on schedule by the Trustee from fees generated.

Owners of the certificates (bonds or stock) received a payment from the Trust.

The REMIC Trust itself was insured by the SPV to protect investors.

If the terms of the mortgage were fulfilled (i.e. everyone was paid) To Whom Does Caprice Owe Any Money?

There still exists a lien on the house that is unenforceable. You would have to go through a process to extinguish that lien by having an attorney file for you a Quiet Title, that silences or quiets any more claims to the property. http://www.newscastmedia.com/securitization.html

Written by Rondaben Esquire
Edited by Joseph Ernest

Supreme court stops home foreclosure dead in its tracks

Foreclosure fraud

Newscast Media –The Massachusetts Supreme Court has ruled against two of the biggest mortgage lenders, and has canceled their foreclosures, backing a lower court ruling made in 2009, saying that the two foreclosures were invalid since banks did not prove that they owned them at the time. The ruling against US Bancorp and Wells Fargo in a case that has been widely watched, and the ramifications will certainly have a ripple effect across the nation. Bank shares fell sharply after the ruling dragging the wider market down.

The decision is among the earliest to address the validity of foreclosures done without proper documentation – so-called robo-loans because they were carried out by people who were unqualified and who often did not check a single line in the paperwork.

After the robo-loan scandal was exposed last year some lenders, including Bank of America, JP Morgan Chase and Ally Financial temporarily stopped seizing homes. Analysts believe this latest court action will further affect the foreclosure process in the US.

Marty Mosby, an analyst at Guggenheim Securities said: “A ruling like this will slow down the foreclosure process. They’re going to have to be really precise and get everything in order. It doesn’t leave a lot of wiggle room.”

The case also applies retrospectively to people who have already been foreclosed. Glenn Russell, a lawyer for one of the couples in the case said: “I’m ecstatic. The fact the decision applies retroactively could mean thousands of homeowners can seek recovery for homes wrongfully foreclosed upon.”

Wells Fargo and US Bancorp lacked the authority to foreclose after having “failed to make the required showing that they were the holders of the mortgages at the time of foreclosure,” wrote Justice Ralph Gants for the Massachusetts court.

Justice Robert Cordy said the banks had displayed “utter carelessness” in documenting their right to own the properties. Courts in other US states are considering similar cases, and all 50 state attorneys general are examining whether lenders are forcing people out of their homes improperly. Wells Fargo had no immediate comment on the decision. US Bancorp spokesman Steve Dale said the decision has no financial impact on the bank. But leading bank shares were affected by the case.

Wells Fargo shares closed down 2.02%, US Bancorp shares were down 0.6, Bank of America was down 1.32% while JP Morgan fell 1.89%. Analysts said the decision may also threaten banks’ ability to package mortgages into securities, and may raise the specter that loans transferred improperly will need to be bought back. http://newscastmedia.com/foreclose.html

Walmart Attempts To Block Class Action Lawsuit

Walmart

Newscast Media — In an attempt to block a class-action lawsuit, Walmart, the world’s largest retailer, has asked the US supreme court to freeze the lawsuit, which alleges the company systematically discriminated against female workers.The company is appealing an April court ruling which authorized the class-action litigation on behalf of an estimated 1.5 million women workers. The women say the company practiced widespread discrimination in its pay and promotion practices.

“The class is larger than the active-duty personnel in the army, navy, air force, marines, and coast guard combined – making it the largest employment class action in history by several orders of magnitude,” Walmart argued in its petition to the court filed on Wednesday.The corporation is arguing that the petition involves too many people to proceed as one case.

Brad Seligman, the lawyer representing six female employees who are spearheading the case, said Walmart’s appeal was an attempt to deny clients their day in court.

“The ruling upholding the class in this case is well within the mainstream that courts at all levels have recognized for decades,” he said. “Only the size of the case is unusual, and that is a product of Walmart’s size and the breadth of the discrimination we documented.” The case was authorized by a divided 9th Circuit US Court of Appeals in April by a 6-5 decision.

The lawsuit was allowed to proceed on the grounds that its mere size should not be a reason to dismiss the case. Lawyers for Walmart insisted that the women named in the case should sue individually and that the size of the class action, which could in theory include as many as 1.5 million women, made it impossible to defend against. http://newscastmedia.com/walmart.htm

Class Action Discrimination Lawsuit brought against U.S. Census Bureau

U.S. Census

Newscast Media — A group pf civil rights organizations filed an Amended Complaint in the U.S. District Court in New York, case number 10-cv-3105, in a class action lawsuit against the Secretary of the U.S. Department of Commerce, the Census Bureau’s parent agency.

The amended lawsuit was filed after new evidence surfaced that shows the U.S. Census Bureau ignored a detailed warning by the federal Equal Employment Opportunity Commission (EEOC) that its screening process for hiring more than one million temporary census workers could result in massive racial and ethnic discrimination.

The complaint cited the EEOC’s warning along with other newly uncovered evidence in a case which seeks compensation for more than 100,000 minorities who were not selected for census work because of unprosecuted arrests and old, minor, and minor convictions for offenses such as unlawful assembly and loitering.

The Census Bureau illegally screened out applicants with often decades-old arrest records for minor or un-convicted offenses that typically would not have deterred other employers including other federal agencies with high security concerns such as the Transportation Security Administration, says the Amended Complaint filed in U.S. District Court in New York.

“Under the discovery process resulting from the filing of the original lawsuit, we implemented a hiring review system they had every reason to know would result in massive discrimination,” said Atty. Samuel R. Miller of the New York-based law firm Outten & Golden LLP.

“About 14 million people in the United States are arrested per year. That means about 70 million people, more than 20 percent of our adult population, have a criminal record,” Miller said. “The FBI retains virtually all arrest records in its database forever – even for juvenile offenses. However, the federal government recognizes that restrictions on hiring individuals on the basis of arrest records are discriminatory and illegal.”

The suit charges the Census Bureau with being reckless, if not intentional, in eliminating from this public service a larger percent of minority applicants than white applicants.

http://newscastmedia.com/class-action-lawsuit.htm