Foreclosure fraud? What fraud?
In Legalizing Mortgage Theft, I asked the Uniform Law Commission (ULC) who was behind the push to eliminate paper mortgage instruments and move them to a national electronic mortgage registry.
ULC is drafting the Home Foreclosure Procedures Act (HFPA).
This question is important to ask considering the Mortgage Electronic Registration Systems, Inc. (MERS) has perpetrated widespread fraud against homeowners through their national electronic registry.
MERS, also known as MERSCORP, has been accused of being ground zero of a Racketeer Influence and Corrupt Organizations Act (RICO) fraud enterprise that contributed to the 2008 economic collapse.
The mortgage bankers used MERS to commandeer the land records without any legislative approval. “MERS’s system is not an alternative to statutory foreclosure law.” (See: Eleazar Salazar, Bankruptcy No: 10-17456-MM13)
Today, the damage continues. MERS has been named as a defendant in countless lawsuits nationwide for illegally foreclosing on homeowners.
Enter the Federal Reserve.
In an exclusively obtained letter from Thomas C. Baxter, Jr., General Counsel and Executive Vice President of the New York Federal Reserve Bank, to William R. Breetz, the Chair of the ULC’S HFPA Drafting Committee, Baxter wrote:
“In contemplating a companion Federal law that would authorize and institute an electronic registry and transfer system for mortgage notes and mortgages, I envision legislation that supports the creation of a national system that moves the industry away from paper but remained information rich, is transparent and accessible to all stakeholders … is credibly governed (suggesting under the supervision of Federal Reserve or FHFA –Federal Housing Finance Agency, HUD etc.) and, where appropriate, freed from state law variations.”
*See NY Fed letter to ULC below
As previously reported, ULC’s current HFPA draft erroneously claimed: “A mortgage registry does not presently exist, but there is substantial interest in its creation.” (HFPA p. 29).
In a long, wide-ranging, phone interview with ULC’s Chair of HFPA, William Breetz, after I asked him how HFPA incorrectly claimed that an electronic registry did not exist, Breetz said, “If there is a mix-up, we need to correct the text … Of course, I am very aware of what MERS is and does. One of their legislative liaisons has been very active with us from the very beginning.”
The Federal Reserve is not a federal agency, despite its name suggesting otherwise. The American people cannot hold it accountable, and it is not known for its transparency.
For instance, during a Freedom of Information Act (FOIA) court battle with Bloomberg the Federal Reserve clearly stated it was “not an agency” of the federal government and therefore not subject to FOIA.
Baxter’s letter is cc’d to ULC’s Lucy Grelle and John A. Sebert and dated October 29, 2012. Baxter acknowledged the “voluminous litigation,” against MERS which Breetz is also very aware of. He confirmed that “MERS is a financial market utility that is focused on meeting the needs of the lenders who own and control it.” The “lenders” are the major banks.
Baxter wrote to Breetz: “Much attention is now being paid to ways of enhancing MERS to meet the needs of borrowers and the concerns expressed about MERS by some courts.” The “borrowers” are the homeowners.
He blamed the concerns, not on the fraud, but on “the basic foundation on which MERS was built (that it must operate within the current legal infrastructure).” MERS “is fatally flawed because of infirmities in the current legal infrastructure.”
Many would disagree with the New York Fed’s counsel.
In an article for Huffington Post University professor L. Randall Wray wrote that MERS is flawed because its business model is illegal:
Wall Street wanted to transform America’s housing sector into the world’s biggest casino and needed to undermine property rights to make it easier to run the scam. The payoffs were bigger for lenders who could induce homeowners to take mortgages they could not possibly afford. The mortgages were packaged into securities sold-on to patsy investors who were defrauded by the “reps and warranties” falsely certifying the securities as backed by top grade loans. In fact the securities were not backed by mortgages, and in any case the mortgages were sure to go bad. Given that homeowners would default, the Wall Street banks that serviced the mortgages needed a foreclosure steamroller to quickly and cheaply throw families out of the homes so that they could be resold to serve as purported collateral for yet more gambling bets. MERS — the industry’s creation — stepped up to the plate to facilitate the fraud. [Judge Robert Grossman NY bankruptcy court] has ruled that its practices are illegal. MERS and the banks lose; investors and homeowners win.
In an interview with Jack Wright of MSFraud.org he warned about the dangers of converting paper real estate notes to be electronic, “A computer or copy machine cannot duplicate or transfer the inseparable intrinsic elements of the original; namely the rights, authority, or monetary value embedded in the original. Yet many of our courts are allowing property to be transferred by entities known for fabricating negotiable instruments and other documents to falsely claim ownership.
We just witnessed JPMorgan Chase getting caught for falsifying ownership documents again in Kalicki v. JPMorgan Chase Bank.”
Wright, who had his house stolen at gunpoint by rogue banks 20 years after his loan was fully discharged, has studied illegal foreclosures since 1997, added: “The UCC requires physical possession of the note at commencement. You can’t take a photograph of an original million-dollar painting, print it out, falsely claim it as the original, and sell it for a million dollars. Yet courts across the country authorize and even authenticate the banks’ ‘altered’ copies. In a recent Oklahoma case, the servicer for an unnamed party in interest did not have the original note. In its attempt to prove standing, the servicer eventually submitted three markedly different versions of the missing original. Judge Carlos Chapelle ignored the defendant’s motion to strike and authenticated all three. So the servicer went from having no note – to having three notes on the same property; all done unlawfully with a computer and a printer.”
Homeowners: 2. Bankers: 0
Just last week a landmark decision was handed down by Honorable J. Curtis Joyner in the U.S. District Court for the Eastern District of Pennsylvania in Nancy J. Becker v. MERS.
MERS lost. Going from paper to electronic lost.
The court found “that [MERS and MERSCORP] are declared to be obligated to create and record written documents memorializing the transfers of debt/promissory notes which are secured by real estate mortgages in the Commonwealth of Pennsylvania for all such debt transfers past, present and future in the Office for the Recording of Deeds in the County where such property is situate.”
Marie McDonnell of McDonnell Analytics, a forensic mortgage analyst, certified fraud examiner, and an expert witness in Becker v. MERS, said: “If the HFPA proposal becomes law, it will make the theft of real estate in America as easy as pushing a button.”
Another MERS defeat was recently decided in Bank of America v. Greenleaf. MERS was told it does not have the power to assign mortgages in Maine.
Breetz, the HFPA Chair, pointed out there have also been rulings in MERS favor which is true, and said while he has been accused of doing the bidding of the bankers that was not the case.
“We have extended the normal drafting time from 2 years to a third year because of the significance of the issues you raised and many others, and because of the controversy within the mortgage industry and homeowners.”
Breetz also said, “I think we have an enormously dangerous system as it is now.”
The Bankers’ MERS Money Making Scheme
Baxter, who has been with the New York Federal Reserve in his current position since 1995, recognized in his letter to Breetz that MERS was created “to make [the] “securitization process” more efficient and less cumbersome” for the bankers.
That’s true. Banks do not make giant profits on individual homes. They cash in when mortgages are securitized, turned into residential mortgage-backed securities (RMBS), and traded at the Depository Trust & Clearing Corporation (DTCC).
The DTCC’s depository provides custody and asset servicing for more than 3.6 million securities issues from the United States and 121 other countries and territories, valued at US$36.5 trillion, according to their website. As Business Insider and CNN reported in 2012, trillions of stock certificates and other paper securities were damaged when the DTCC’s state-of-the-art vaults failed during hurricane Sandy in Lower Manhattan at 55 Water Street.
The DTCC reopened for business the next day “electronically.”
Despite court rulings finding MERS acted illegally, Baxter claims that the real problem is that the nineteenth century laws need to be modernized and rewritten.
“What exists does not allow MERS to address other problems, like the fact the legacy legal infrastructure locks us into a nineteenth century paper-based world, where the written form is almost considered sacred,” he wrote, “It also holds the secondary mortgage market, a national market hostage to local variation in real property law.”
Breetz believes the Federal Reserve’s strategy for a national electronic registry is the correct path, because, “like it or not” we are in the modern age and we can’t go back and undo what has already happened but correct it for the future. Breetz sincerely believes that ‘going electronic’ is not the problem.
“It all depends on how it is done,” Breetz said, “Electronics could do a lot to solve at least some of the problems.”
The issue here is multi-fold.
First, most homeowners did not know when they bought their homes their mortgages would be securitized by the bankers. Now, as a result of the fraud that occurred during the securitization process—the electronic transfer of their chain of titles, homeowners cannot determine who their lenders are.
“During the mortgage securitization frenzy, original notes were destroyed after they were scanned into a digital image. Now anything on that image can be altered. The image can be duplicated and transferred electronically to any number of recipients instantly regardless of any type of so-called security. But like a scanned dollar bill, the electronic data has no tangible value. At best, the possessor can only allege the image is the original, but without the original, there is no way to be certain,” Wright said.
The results have been devastating—illegal bank foreclosures across the country and worthless, junk RMBS. The repercussions are so vast that pension companies and countries who invested in them lost—big time.
And despite the carnage, no one has been arrested. No one has gone to jail for the fraud that contributed to the 2008 economic collapse and continues to hurt homeowners today.
Given that Baxter’s justification is the need to keep a “secondary mortgage market” open for business, at minimum homeowners should be given an option as to whether or not their mortgages may be securitized— up-front, in bold lettering; not buried somewhere in fine print that few people read.
Borrowing from Baxter, homeowners should be able to choose whether or not they want to be held hostage to the bankers again in another national electronic registry as part of their lucrative money-making “secondary mortgage market.”
Truth be told; the illegal foreclosures, and worthless RMBS would not have happened if paper mortgage documents were properly recorded. This is what the banks do not want people to see because the bankers make a financial killing off the securitized mortgages. Most homeowners simply wanted to buy a house.
Is the NY Fed exerting undue influence on the ULC and American homeowners? If so, there appears to be a pattern. Yesterday Congressman Scott Garrett (R-NJ) questioned the NY Fed role in U.S. regulatory risk panel.
Banks became casinos after the Glass-Steagall Act of 1933 was repealed under President Bill Clinton with the help of a Republican Congress. Since the Great Depression Glass-Steagall kept traditional banks and banking separate from the high-risk investment banks known today as the “too big to fail” banks.
Politicians like Senator Charles “Chuck” Schumer (D-NY) previously warned against repealing Glass-Steagall for that very reason, in 1987 in “Don’t let banks become casinos,” until he supported it, and his warnings became a reality.
Other politicians like Senator Elizabeth Warren want Glass-Steagall reinstated and modernized.
Baxter believes these law reforms are in America’s national interests. “Obviously an effort to introduce Federal legislation in support of a national electronic mortgage and mortgage note transfer system is a very ambitious effort,” he wrote.
“I believe that this is also an opportune time to contemplate complementary Federal legislation that would introduce a legal infrastructure that supports a movement away from paper …These ideas have the promise of making these markets more efficient and remedy some of the root problems that make the current system vulnerable to criticism and possible abuse, “ Baxter’s letter states.
The question remains why would a new national electronic registry potentially governed by a Fed bank not have the same problems as MERS which was also owned by the banks?
When I contacted Baxter for his thoughts on the ULC’s HFPA draft, the NY Fed’s Media Relations office said, “Thank you for the email. Mr. Baxter will not have any additional comments at this time.”
While Baxter says, his views do not “officially” represent the position of the Federal Reserve he granted that his views became “more informed following close consultation” with his “Federal Reserve colleagues.” He offered their assistance because the Federal Reserve has worked with uniform law and Congress to enact legislation in the past.
As he wrote, “One example was when they “reformed” UCC Article in the “Check Clearing in the 21st century Act” which allowed checks themselves to be electronified.”
For Breetz’s part, to his credit, he has agreed to have some homeowners who are fighting the banks in court observe ULC’s meeting on HFPA in Seattle this Friday.
To help him draft HFPA, Breetz said what he needed but was unable to locate were reported cases that he could cite to the other lawyers which prove how the “bad guys” were able to foreclose on homes where the debt had already been paid off.
“These types of cases were easiest to justify a change in law— showing there was no, “he said, she said” to the facts.”
Within hours of contacting a couple homeowners I knew who are fighting the bankers in court, Breetz had plenty of cases to choose from.
Sometimes people do not understand the damage mortgage fraud has caused until it happens to them.
Thomas Baxter New York Federal Reserve Bank letter to Uniform Law Commission on new foreclosure laws by Marinka Peschmann
Thanks to EconoMonitor–A Roubini Global Economics Project. Read Professor L. Randall Wray’s Join the Protest Against Hometheft. Professor Wray is a Professor of Economics at the University of Missouri-Kansas City and Senior Scholar at the Levy Economics Institute of Bard College, NY.
See also: Joseph William Singer, “Foreclosure and the Failures of Formality, or Subprime Mortgage Conundrums and How to Fix Them,” Connecticut Law Review, December 2013.
Update: According to an attorney for a number of homeowners throughout the country who was at the ULC’s meeting and rally in Seattle, William Breetz kept his word and met with a group of homeowners after the conference.
She reported that HFPA Drafting Committee Chairman Breetz appeared to be sincere and seemed very interested in some of what homeowners and their representatives had to say.
Chairman Breetz has scheduled another meeting with some Washington State homeowners and their representatives on Tuesday, July 15, 2014 in Seattle. The ULC Drafting Committee will meet again in Chicago in November, 2014.
It is my understanding that HFPA is a year away from becoming law. In what form remains to be seen. Now is the time for homeowners to weigh in and make their voices known to the ULC, all the bankers and the Federal Reserve.
Some resources for homeowners facing illegal foreclosures who want/need to file lawsuits against the bankers
There are scores of homeowners nationwide who have been fighting the bankers in court for years—many pro se. As a result of their efforts, they are not only pushing back against the bankers but have amassed an abundant amount of information and resources for all homeowners to use (free and paid) to join the court battles and restore the rule of law.
Do your own research and follow the best route for your circumstances. Below are some mortgage fraud websites to help get you started. Some of the owners I’ve spoken with directly, other websites came highly recommended. They are in no particular order.
McDonnell Property Analytics (Note McDonnell’s role in a landmark win above).
Update: Now for some good news.
In true David and Goliath fashion, it is everyday Americans making a difference by taking on the banks in courts across the country. These individuals are litigating to expose and clean up the fraud in America’s economy.
See also, Harrison v. Deutsche Bank. Deutsche Bank’s case falls to pieces and another homeowner sees justice.
“The witness admitted Ocwen had no involvement in the mortgage loan whatsoever for the first nine (9) years of the loan since 2004. She testified she had no knowledge of the prior servicer’s business records as she had never worked for them. The court finds that there was a break in the chain of assignments of mortgage contained in the court file.”
In Michigan, there was a pro se homeowner win by filing a cease and desist order and calling out the lawyer. Check it out.
In California, Yuba jury awards homeowner $16.2 million in damages in a mortgage case against PHH Mortgage Services.
MUST LISTEN: Meet the Lawyers who Won $16 Million for CA Homeowner – A Mandelman Matters Podcast
Pro Se win in New Mexico Court of Appeals. “We agree with homeowner and Reverse.” BONY v. Lopez
Jury awards $6 million to woman in fraud suit against bank arising out of real estate loan
Keys to Stopping Foreclosures … Dodd Frank Protections. Watch.
Check out the radio show The Foreclosure Hour. National foreclosure info all the time hosted by the Dubin Law office in Hawaii
September 18, 2014 Class action filed against Ocwen. “SAN DIEGO, Sep 16, 2014 (BUSINESS WIRE) — Robbins Geller Rudman & Dowd LLP (“Robbins Geller”) (http://www.rgrdlaw.com/cases/ocwen/) today announced that a class action has been commenced in the United States District Court for the District of the U.S. Virgin Islands on behalf of purchasers of Ocwen Financial Corporation (“Ocwen”) (NYSE:OCN) common stock during the period between October 3, 2012 and August 11, 2014 (the “Class Period”).”
November 2, 2014. More Updates (thanks to Shelley):
Judge Throws Out $16M Verdict Against PHH for Servicing Errors
“The judge did acknowledge that PHH had acted as a “bad party” to the loan modification contract. PHH made “inconsistent demands for payment arguably repudiating the modification contract, threatened [Linza] with foreclosure, refused to return his many calls or to apologize for or correct its errors, refused to enter into a new agreement and even ridiculed his plight.””
Court denies US Bank Motion to Dismiss on 8 of 9 Counts
BUFFINGTON v. US BANK/OCWEN
The Order is a damning indictment of the mortgage industry. What is telling is the Court agreed that the Plaintiff’s note probably received shared loss payments and that the Plaintiffs may owe no money!
Judge: “It is regrettable that we accommodated the financial institutions because of their importance. It sickens me. But that is not before us here.”
See also, Pierce County lender Kandi gets 5 years for mortgage fraud
See also: Time Magazine’s List of the “25 People to Blame for the [2007-2008] Financial Crisis. “ This list includes politicians from both sides of the aisle, including President Bill Clinton and President George W. Bush.
Kindly remove any politically tainted glasses and see things for what they are.