Just when you’ve thought you seen, heard and been hurt by this all, Abigail has another jackpot story on her site…besides what’s to stop them since they aren’t protecting the homeowners!

Abigail C. Field-

A shocking aspect of the proposed foreclosure fraud settlement among Bailed-Out Banks, the state attorneys general, and the Feds has rightly gotten a lot of attention, namely the Bailed-Out Banks’ ability to use other people’s money to pay their “penalty.” I confess, when I first heard about it, I figured it was a testament to the federal government’s craven capitulation to the Bailed Out Banks. (Let’s call them the B.O.B.s, rhymes with S.O.Bs.) But now I know it’s much worse than that, thanks to excellent reporting by David Dayen. The federal government really wants the B.O.Bs to use pension fund money to pay their “penalty.”

[REALITY CHECK]

EXECUTIVE SUMMARY

The Office of Corporate Justice has retained Baker & Hostetler LLP to conduct an independent investigation of concerns expressed by Mr. Nye Lavalle, a Fannie Mae shareholder, about several Fannie Mae business practices in connection with single-family mortgages. 1 Mr. Lavalle accuses Fannie Mae of “aiding, abetting and sanctioning … predatory lending and servicing schemes,” as well as committing accounting and securities fraud, and racketeering violations. He views Fannie Mae as responsible for damage inflicted on single-family borrowers by unscrupulous lenders and servicers because Fannie Mae approves lenders and servicers, maintains servicer profiles and ratings, approves mortgage document terms and servicing requirements, and benefits from the income stream created by wrongdoing. He fears Fannie Mae’s alleged failures could result in both civil and criminal liability that would affect shareholder value.

Through a series of communications to members of the Board of Directors and
others starting in December 2003, Mr. Lavalle called for an independent investigation of his
allegations? The Board of Directors decided to conduct an internal review of these concerns.
On September 12,2005, the Office of Corporate Justice retained Baker & Hostetler LLP.

Mr. Lavalle began investigating the mortgage industry after his parents, Anthony
and Matilde L. Pew, had a dispute with mortgage servicer EMC Mortgage Corporation (“EMC”),
a subsidiary of Bear Stearns Companies (“Bear Stearns,,).3 EMC ultimately foreclosed on the
Pews’ property, even though, according to Mr. Lavalle, his family is wealthy and made repeated
efforts to repay the loan.4 The dispute motivated Mr. Lavalle to investigate and publicize his
allegations that EMC engaged in predatory servicing practices, which has resulted in several
lawsuits between Bear Stearns and Mr. Lavalle. 5 Mr. Lavalle then broadened his focus to
include the single-family mortgage industry as a whole.

Mr. Lavalle considers himself a gadfly of the mortgage industry. He claims to
have been investigating, analyzing and exposing mortgage fraud, predatory lending and
servicing, and securitization schemes since 1993.6 He has a website that details his complaints,
and has posted information on several other sites. 7 He claims to have spent more than 20,000
hours and nearly $500,000 investigating predatory lending and servicing. 8 He reports that he is a
consultant to plaintiff lawyers who sue lenders and servicers and to homeowners.
Mr. Lavalle’s view is that since Fannie Mae is such an important force in the
mortgage industry, it has both the responsibility and means to end abusive lending and servicing
practices. Mr. Lavalle’s view is that Fannie Mae directs the conduct of servicers from afar. In
an e-mail ofFebruary21.2006.Mr. Lavalle expresses his frustration, saying:
I hate to keep using the analogies that you don’t like but it really is
like a Mafia operation. The Godfather [Fannie Mae] says we got a
problem, “take care of it” and the lieutenant ["the servicer"]
orders the hit [foreclosure] and hires the hitman [the USFN or
other lawyer to foreclose].

The hit man and lieutenant don’t want the Godfather implicated so
they create layers of deniability [a typical CIA, white house, legal
and political maneuver] to conceal who the real parties in interest
are and who had knowledge of and ordered the hit.

While Mr. Lavalle is partial to extreme analogies that undermine his credibility, he has become
knowledgeable about the mortgage industry. He has identified significant issues but, in our
view, does not always analyze them correctly. In proposing solutions, he generally undervalues
the benefits to homeowners of efficient mortgage markets operated at low costs and overstates
the needs of borrowers to have information about the status of their loans in the secondary
markets for mortgages. Fannie Mae has already identified and is addressing many of the same
issues. This report details several areas where Fannie Mae faces legal and business issues that
remain to be addressed.

Mr. Lavalle also claims that as a result of this work, he and his family have been
harassed. He expresses considerable anger when he attributes these attacks to Fannie Mae. An
investigation of his personal retaliation claim is in progress; to date Mr. Lavalle has identified no
direct conduct by Fannie Mae that he considers harassing.

We have reviewed more than 1,500 pages of documents provided by Mr. Lavalle
to Fannie Mae or us directly and had 17 conversations with him. We have identified six general
areas of his concerns: (1) foreclosure policies and procedures, (2) transparency, (3) protection of
promissory notes, (4) predatory servicing, (5) fraud detection and reporting, and (6) accounting
and securities issues. Within each area, Mr. Lavalle identifies multiple issues that are detailed in
this report. In investigating these concerns, we have collected documents from Mr. Lavalle,
Fannie Mae and public sources, reviewed extensively eFannie.com, and interviewed at least 30
Fannie Mae employees. The company has fully cooperated in our investigation.
In reviewing Mr. Lavalle’s concerns as a shareholder, we have told Mr. Lavalle
that the proper scope of our investigation is to determine whether he has identified wrongdoing
hy Fannie Mae officials or financial risks of sufficient magnitude to affect materially Fannie
Mae’s financial statements. We cannot resolve every case of an alleged mishandled mortgage.
1. Foreclosure Policies and Procedures

Mr. Lavalle asserts that Fannie Mae’s mortgage servicers and the Mortgage
Electronic Registry System, Inc. (“MERS”) routinely make misrepresentations in foreclosure
proceedings. He has identified two categories of alleged misrepresentations: that MERS or the
servicers are the holders and owners of the defaulted promissory notes, and that promissory notes
are lost, stolen or destroyed.9 He also questions whether foreclosures in the name of MERS or
servicers satisfy state laws on standing to sue. Since Fannie Mae authorizes foreclosures, Mr.
Lavalle argues that Fannie Mae could be liable for these misrepresentations, including for
racketeering violations under federal and state laws, and could risk having foreclosure sales
unwound by the courts. 10

We have found evidence that false statements by foreclosure attorneys are being
routinely made in at least two counties in Florida and appear to be occurring elsewhere.
Apparently due to Mr. Lavalle’s ex parte communications, two Florida judges ordered hearings
to examine MERS’s role in foreclosures. During consolidated hearings that resulted in the
judges dismissing 24 foreclosure actions, three judges (including one who took the time to
observe and comment) criticized MERS for routinely filing “sham” pleadings and “false”
affidavits regarding its interest in promissory notes and supposed lost promissory notes. I I One
judge questioned whether large numbers of foreclosures would have to be reversed due to fraud
on the court.

[...]

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“From my own personal experience and 20 years of research and investigation, nothing — and I mean nothing — that a bank, lender, loan servicer or their lawyer says or puts on paper can be trusted and accepted as true,” Mr. Lavalle said.

NYT-

YEARS before the housing bust — before all those home loans turned sour and millions of Americans faced foreclosure — a wealthy businessman in Florida set out to blow the whistle on the mortgage game.

His name is Nye Lavalle, and he first came to attention not in finance but in sports and advertising. He turned heads in marketing circles by correctly predicting that Nascar and figure skating would draw huge followings in the 1990s.

[FAIR GAME NYT]

The Never Ending Story… of smoke and mirrors.

HuffPO-

In his State of the Union speech, President Obama said and proposed many reasonable-sounding things. One of them was this:

We’ll also establish a Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud… financial firms violate major anti-fraud laws because there’s no real penalty for being a repeat offender… So pass legislation that makes the penalties for fraud count.

And tonight, I’m asking my Attorney General to create a special unit of federal prosecutors and leading state attorney general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis.

Now, how could you be against that? In his speech, and indeed as has been true for his entire career, Mr. Obama deserves an A for rhetoric. But what grade does he deserve for action? Alas, he flunks.

[HUFFINGTONPOST]

image: fixturescloseup

It’s ON Like Donkey Kong!! No Settlement Going Down Now!

Will this end up with the one & only Judge Schack since it’s in his district?

“Plaintiffs Designate Kings County as place of TRIAL!!”

THE PEOPLE OF THE STATE OF NEW YORK by ERIC T. SCHNEIDERMAN

vs.

MERSCORP, MERS, JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A

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Complaint Charges Use Of MERS By Bank Of America, J.P. Morgan Chase, And Wells Fargo Resulted In Fraudulent Foreclosure Filings  

Servicers And MERS Filed Improper Foreclosure Actions Where Authority To Sue Was Questionable

Schneiderman: MERS And Servicers Engaged In Deceptive and Fraudulent Practices That Harmed Homeowners And Undermined Judicial Foreclosure Process

NEW YORK – Attorney General Eric T. Schneiderman today filed a lawsuit against several of the nation’s largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process. The lawsuit asserts that employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as “MERS certifying officers,” have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.

The lawsuit further asserts that the MERS System has effectively eliminated homeowners’ and the public’s ability to track property transfers through the traditional public records system. Instead, this information is now stored only in a private database – which is plagued with inaccuracies and errors – over which MERS and its financial institution members exercise sole control. Additional defendants include BAC Home Loans Servicing, LP, Chase Home Finance LLC, EMC Mortgage Corporation, and Wells Fargo Home Mortgage, Inc.

“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages. Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law,” said Attorney General Schneiderman. “Our action demonstrates that there is one set of rules for all – no matter how big or powerful the institution may be – and that those rules will be enforced vigorously. Only through real accountability for the illegal and deceptive conduct in the foreclosure crisis will there be justice for New York’s homeowners.”

The financial industry created MERS in 1995 to allow financial institutions to evade local county recording fees, avoid the hassle and paperwork of publicly recording mortgage transfers, and facilitate the rapid sale and securitization of mortgages. MERS operates as a membership organization, and most large companies that participate in the mortgage industry – by originating loans, buying or investing in loans, or servicing loans – are members, including JPMorgan Chase, Bank of America, Wells Fargo, Fannie Mae, and Freddie Mac. Over 70 million loans nationally have been registered in MERS System, including about 30 million currently active loans.

Through their membership in MERS, these companies avoided publicly recording the purchase and sale of mortgages by designating MERS Inc. – a shell company with no economic interest in any mortgage loan – as the “nominal” mortgagee of the loan in the public records. Instead, MERS members were supposed to log mortgage transfers in the MERS private electronic registry. The basic theory behind MERS is that, because MERS Inc. serves as a “nominee” (or agent) for most major lenders, it remains the “mortgagee” in the public records regardless of how often the loan is sold or transferred among MERS members. Thus, although MERSCORP has only about 70 employees, MERS Inc. serves as the mortgagee of record for tens of millions of loans registered in the MERS System.

MERS has granted over 20,000 “certifying officers” the authority to act on its behalf, including the authority to assign mortgages, to execute paperwork necessary to foreclose, and to submit filings on behalf of MERS in bankruptcy proceedings. These certifying officers are not MERS employees, but instead are employed by MERS members, including JPMorgan Chase, Bank of America, and Wells Fargo.

[...]

The lawsuit specifically charges that the defendants have engaged in the following fraudulent and deceptive practices:

• MERS has filed over 13,000 foreclosure actions against New York homeowners listing itself as the plaintiff, but in many instances, MERS lacked the legal authority to foreclose and did not own or hold the promissory note, despite saying otherwise in court submissions.
• MERS certifying officers, including employees and agents of JPMorgan Chase, Bank of America, and Wells Fargo, have repeatedly executed and submitted in court legal documents purporting to assign the mortgage and/or note to the foreclosing party. These documents contain numerous defects, including affirmative misrepresentations of fact, which render them false, deceptive, and/or invalid. These assignments were often automatically generated and “robosigned” by individuals who did not review the underlying property ownership records, confirm the documents’ accuracy, or even read the documents. These false and defective assignments often masked gaps in the chain of title and the foreclosing party’s inability to establish its authority to foreclose, and as a result have misled homeowners and the courts.
• MERS’ indiscriminate use of non-employee “certifying officers” to execute vital legal documents has confused, misled, and deceived homeowners and the courts and made it difficult to ascertain whether a party actually has the right to foreclose. MERS certifying officers have regularly executed and submitted in court mortgage assignments and other legal documents on behalf of MERS without disclosing that they are not MERS employees, but instead are employed by other entities, such as the mortgage servicer filing the case or its counsel. The signature line just indicates that the individual is an “Assistant Secretary,” “Vice President,” or other officer of MERS. Indeed, these documents often purport to assign the mortgage to the certifying officer’s own employer. Moreover, as a result of the defendants’ failure to track the designation of certifying officers and the scope of their authority to act, individuals have executed legal documents on behalf of MERS, such as mortgage assignments and loan modifications, when they were either not designated as a MERS certifying officer at the time or were not authorized to execute documents on behalf of MERS with respect to the subject loan.
• MERS and its members have deceived and misled borrowers about the importance and ramifications of MERS’ role with respect to their loan by providing inadequate disclosures.
• The MERS System is riddled with inaccuracies which make it difficult to verify the chain of title for a loan or the current note-holder, and creates confusion among stakeholders who rely on the information. In addition, as a result of these inaccuracies, MERS has filed mortgage satisfactions against the wrong property.

[ag.ny.gov]

Abigail C. Field-

WARNING: Attention homeowners: Do not read this post as legal advice. Although the information in this post is true, securitization fail, even of your loan, will not typically prevent the bank from foreclosing on you, unless you have a good lawyer. Even then, realistic end game is a sustainable modification, not a free house. More after the post.

—

The criminal securities fraud at the heart of the financial crisis has one very under-reported aspect: “securitization fail.” Once you understand the securitization fail concept, you can instantly, with tremendous clarity, see the scale of the fraud the Bailed Out Banks and Wall Street firms committed and commit every day. Get securitization fail, and the bankers’ crimes stand out like a vast herd of bison on the South Dakota prairie, a herd much bigger than this one.

[REALITY CHECK]

John O’Brien to MA AG Martha Coakley urging her not to sign onto the 50 state settlement with the banks.

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Delaware Attorney General Beau Biden has said he won’t sign on to the settlement and Nevada AG Masto wants her 38 questions answered and CA AG Kamala D. Harris said thanks but she isn’t signing either!

Bloomberg-

The deadline for states to decide whether to join a proposed nationwide foreclosure settlement with banks was postponed to Feb. 6 from Feb. 3, according to the Iowa Attorney General’s Office.

States were given more time to evaluate the proposal, which may total $25 billion, after at least one asked for a delay, Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, said today in a phone interview. Miller is helping to lead negotiations.

State and federal officials have been negotiating an agreement with mortgage servicers that would provide mortgage relief to homeowners and set requirements for how banks conduct foreclosures.

[BLOOMBERG]

Some states have raised concerns about the releases, saying they shouldn’t protect banks from claims that haven’t been investigated.

It would be nice to see the AG’s grow some ***** and treat this as a crime scene and not bow down. I disagree with Kroger.

Bloomberg-

Oregon’s attorney general agreed to join a proposed multistate settlement over foreclosure and mortgage-servicing, saying it penalizes banks and offers relief to homeowners.

The settlement will provide $30 million to the state and as much as $200 million in relief to Oregon homeowners, including those facing foreclosure, Attorney General John Kroger said today in a statement.

“This agreement penalizes banks that engaged in wrongful foreclosure practices and brings badly needed relief for distressed homeowners,” he said. “I am not confident we could get a better agreement on this limited set of issues if we litigated for several more years.”

[...]

Connecticut Attorney General George Jepsen said in an e- mailed statement yesterday that he would also sign on to the agreement. The deal “would impose tough new servicing standards on banks and hold them accountable for what have become familiar abuses,” he said.

[BLOOMBERG]

How many settlements have already taken place? This won’t stop the banks either!

REUTERS-

A proposed settlement to resolve mortgage abuses by top U.S. banks will give states broad authority to punish firms that mistreat borrowers in the future, according to documents seen by Reuters on Wednesday.

Under the settlement, which states are currently reviewing to decide whether they will join, the states and a separate “monitoring committee” will have the authority to go to court to enforce the terms and seek penalties of up to $5 million per violation.

A strong enforcement mechanism could help the states and the Obama administration sell the deal to the public, after left-leaning activist groups have questioned whether the negotiations were too lenient on the banks.

States have just a few more days to make a decision, and an announcement of a settlement could come as early as next week, people familiar with the talks said.

[REUTERS/YAHOO]

New Economic Perspectives-

By William K. Black

The Obama administration’s record of prosecuting elite financial frauds is worse than the Bush administration’s record, which is a very large statement. Syracuse University’s TRAC issued a report on November 11, 2011 entitled “Criminal Prosecutions for Financial Institution Fraud Continue to Fall.”

Neither administration has prosecuted any elite CEO for the epidemic of mortgage fraud that drove the ongoing crisis. This contrasts with over 1,000 elite felony convictions arising from the S&L debacle. The ongoing crisis caused losses more than 70 times greater than the S&L debacle and the amount of elite fraud driving this crisis is also vastly greater than during the S&L debacle. Bank CEOs leading “accounting control frauds” now do so with impunity from the criminal laws. They become wealthy through fraud and even if they are sued civilly they almost invariably walk away wealthy with the proceeds of their frauds.

The Obama Administration Prefers Politics and Propaganda to Prosecutions

Elite financial institutions officers engaged in fraud face a dramatically reduced risk of prosecution compared to 20 years ago when financial fraud was far less common. TRAC reports that the number of financial institution fraud prosecutions under Obama is less than one-half the number 20 years ago. Bush (II) was slightly better than Obama in prosecuting non-elite financial institution frauds, but both were pathetically bad.

[NEW ECONOMIC PERSPECTIVES]

If you want to know where the bodies are buried, look no further. Here are a few snips from Marie’s brief:

In what has become common parlance among those
investigating these securitization failures (including
the Securities and Exchange Commission and the
Department of Justice), we refer to this type of
transfer as an “A to D” assignment because it skips
over parties “B” and “C” and creates a “wild deed”
(especially in title theory states such as
Massachusetts).

The assignment of mortgage is the “breeder
document” from which all other paperwork necessary
to bring the foreclosure action; notice the sale;
obtain judgment; and transfer title depends.

“The Eaton Defect” as described in our amicus brief occurs when an entity, such as Green Tree Servicing LLC takes the mortgage by assignment and prosecutes a foreclosure in its own name when it neither owns nor holds the note.

“The Ibanez Defect” as described in this amicus brief occurs when an entity, such as Option One Mortgage Corporation, sells the loan for securitization purposes and later, after the loan has been sold multiple times, assigns the Note and Mortgage (or just the Mortgage) directly to the Trustee of the Issuing Entity (securitized trust).

Supreme Judicial Court
FOR THE COMMONWEALTH OF MASSACHUSETTS
NO. SJC-11041
SUFFOLK COUNTY

HENRIETTA EATON,
PLAINTIFF-APPELLEE,

v.

FEDERAL NATIONAL MORTGAGE ASSOCIATION & ANOTHER,
DEFENDANTS-APPELLANTS.

ON APPEAL FROM AN INTERLOCUTORY ORDER OF THE SUFFOLK SUPERIOR COURT

SUPPLEMENTAL BRIEF OF
AMICUS CURIAE MARIE MCDONNELL, CFE

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Michigan Supreme Court
Lansing, Michigan

January 30, 2012

AARON RICHARD,
Plaintiff-Appellee,

v

SCHNEIDERMAN & SHERMAN, P.C.,
Defendant-Appellant,

and

GMAC MORTGAGE, and MORTGAGE
ELECTRONIC REGISTRATION SYSTEMS,
INC.,
Defendants-Appellees.
_________________________________________/

By order of December 29, 2011, the proceedings in this case were automatically
stayed by the filing of a petition in bankruptcy. On order of the Court, the bankruptcy
stay having been lifted and the case having been reopened, the application for leave to
appeal the August 25, 2011 judgment of the Court of Appeals is considered and, pursuant
to MCR 7.302(H)(1), in lieu of granting leave to appeal, we VACATE the judgment of
the Court of Appeals and we REMAND this case to the Court of Appeals for
reconsideration in light of Residential Funding Co, LLC, f/k/a Residential Funding Corp
v Saurman, 490 Mich ___ (decided November 16, 2011).

MARILYN KELLY, J., would grant leave to appeal.

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