Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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One recent meme circulated on the Internet by various swindlers and scam artists is that because a borrower's loan has been "table-funded" by a lender or bank other than the Lender shown on the Note or Mortgage, Deed of Trust, Trust Deed or other mortgage security instrument, that the loan is void, voidable or otherwise unenforceable.

LIKE MOST OF THE FALSE INFORMATION PERPETRATED BY THESE SCAM ARTISTS, THERE IS NO TRUTH WHATSOEVER TO THIS ASSERTION.


When one of the scam artists claims this to be the case, ask for the statute or case showing authority for this proposition. They can NEVER PROVIDE IT, because it simply IS NOT TRUE.

There ARE a couple of distinctions about "table-funded" loans that are noteworthy. First, Regulation Z expressly recognizes table-funded loans and discusses how to calculate finance charges in consideration of fees that might otherwise be shown in respect of such transactions. This mention in Regulation Z also implicitly recognizes that table-funding exists and is legal.

The second distinction with respect to table-funded loans is that table funding by a national bank of federally supervised thrift institution immediately takes the loan OUT of state consumer protection law applicability where ever Federal law preempts state law.

See for example, OCC Interpretive Letter 1002 dated May 13, 2004, signed by John D. Hawke, Jr., the Comptroller of the Currency, which is exemplary of similar letters:

http://www.occ.gov/static/interpretations-and-precedents/aug04/int1002.pdf

Courts have universally recognized this preemption.

So when a swindler and scam artist encourages you to rush into court and argue that your loan is "table-funded", be aware that this will entitle you to NO SPECIAL PRIVILEGES whatsoever and will do nothing whatsoever to VOID your note or mortgage. On the other hand, your argument might very well persuade the Court NOT to apply state banking or consumer protection regulations to YOUR LOAN, since you have effectively ARGUED that your loan is subject to Federal preemption.

When someone comes around encouraging you to make arguments which may cost you your home, be sure to get that person's name, address and telephone number, so that you can report this person to criminal and other supervisory authorities.

If you are AWARE of any persons who are telling borrowers that their loan is VOID because it was "table-funded", you should report this person to your state attorney general and the Federal Trade Commission right away, because this person is probably promoting debt modification scams or debt elimination scams.
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f
24 C.F.R §3500.2(b)

"Table funding means a settlement at which a loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds. A table-funded transaction is not a secondary market transaction (see § 3500.5(b)(7)).

http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=5348327331c395884c3974efb5ba8065&rgn=div8&view=text&node=24:5.1.4.1.8.0.13.2&idno=24


24 C.F.R §3500.5(b)(7)

"(7) Secondary market transactions. A bona fide transfer of a loan obligation in the secondary market is not covered by RESPA and this part, except as set forth in section 6 of RESPA (12 U.S.C. 2605) and § 3500.21. In determining what constitutes a bona fide transfer, HUD will consider the real source of funding and the real interest of the funding lender. Mortgage broker transactions that are table-funded are not secondary market transactions. Neither the creation of a dealer loan or dealer consumer credit contract, nor the first assignment of such loan or contract to a lender, is a secondary market transaction (see § 3500.2.)"

http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=5348327331c395884c3974efb5ba8065&rgn=div8&view=text&node=24:5.1.4.1.8.0.13.5&idno=24
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f
Federal Banking Regulations concerning enforcement of the Homeowners Loan Act (HOLA):

12 C.F.R. §560.2(a)

"(a) Occupation of field. Pursuant to sections 4(a) and 5(a) of the HOLA, 12 U.S.C. 1463(a), 1464(a), OTS is authorized to promulgate regulations that preempt state laws affecting the operations of federal savings associations when deemed appropriate to facilitate the safe and sound operation of federal savings associations, to enable federal savings associations to conduct their operations in accordance with the best practices of thrift institutions in the United States, or to further other purposes of the HOLA. To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices (by efficiently delivering low-cost credit to the public free from undue regulatory duplication and burden), OTS hereby occupies the entire field of lending regulation for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings associations may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or otherwise affect their credit activities, except to the extent provided in paragraph (c) of this section or § 560.110 of this part. For purposes of this section, “state law” includes any state statute, regulation, ruling, order or judicial decision. "


12 C.F.R. §560.2(b)

(b) Illustrative examples. Except as provided in § 560.110 of this part, the types of state laws preempted by paragraph (a) of this section include, without limitation, state laws purporting to impose requirements regarding:

(1) Licensing, registration, filings, or reports by creditors;

(2) The ability of a creditor to require or obtain private mortgage insurance, insurance for other collateral, or other credit enhancements;

(3) Loan-to-value ratios;

(4) The terms of credit, including amortization of loans and the deferral and capitalization of interest and adjustments to the interest rate, balance, payments due, or term to maturity of the loan, including the circumstances under which a loan may be called due and payable upon the passage of time or a specified event external to the loan;

(5) Loan-related fees, including without limitation, initial charges, late charges, prepayment penalties, servicing fees, and overlimit fees;

(6) Escrow accounts, impound accounts, and similar accounts;

(7) Security property, including leaseholds;

(8) Access to and use of credit reports;

(9) Disclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents and laws requiring creditors to supply copies of credit reports to borrowers or applicants;

(10) Processing, origination, servicing, sale or purchase of, or investment or participation in, mortgages;

(11) Disbursements and repayments;

(12) Usury and interest rate ceilings to the extent provided in 12 U.S.C. 1735f-7a and part 590 of this chapter and 12 U.S.C. 1463(g) and § 560.110 of this part; and

(13) Due-on-sale clauses to the extent provided in 12 U.S.C. 1701j-3 and part 591 of this chapter.

(c) State laws that are not preempted. State laws of the following types are not preempted to the extent that they only incidentally affect the lending operations of Federal savings associations or are otherwise consistent with the purposes of paragraph (a) of this section:

(1) Contract and commercial law;

(2) Real property law;

(3) Homestead laws specified in 12 U.S.C. 1462a(f);

(4) Tort law;

(5) Criminal law; and

(6) Any other law that OTS, upon review, finds:

(i) Furthers a vital state interest; and

(ii) Either has only an incidental effect on lending operations or is not otherwise contrary to the purposes expressed in paragraph (a) of this section.

http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=5348327331c395884c3974efb5ba8065&rgn=div8&view=text&node=12:6.0.1.1.30.0.43.2&idno=12

Good luck trying to plead New York's extremely consumer friendly state regulatory laws AFTER you have [i]judicially admitted that your loan was "table-funded"![/b]
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f
On the validity of Federal preemption:

"In our judgment the regulatory control of the Bank Board over federal savings and loan associations is so pervasive as to leave no room for state regulatory control. As this court noted in Meyers v. Beverly Hills Federal Savings & Loan Ass'n., 499 F.2d 1145, 1147 (9th Cir. 1974):

"Pursuant to its valid statutory authority, the Federal Home Loan Bank Board has promulgated comprehensive regulations covering all aspects of every federal savings and loan association `from its cradle to its corporate grave.' People of State of California v. Coast Federal Savings and Loan Ass'n., S.D.Cal.1951, 98 F.Supp. 311, 316."

The broad regulatory authority over the federal associations conferred upon the Bank Board by HOLA does wholly pre-empt the field of regulatory control over these associations. If state-conferred rights are to be enforced against the federal associations by any regulatory body (a question we do not reach), enforcement must be by the Bank Board."
[i]Conference of Federal Savings and Loan Associations v. Stein, 604 F. 2d 1256 (9th Cir. 1979), aff'd, 445 U.S. 921 (1980).[/b]
http://scholar.google.com/scholar_case?case=2730926673764709182

(That means the decision was AFFIRMED by the U.S. Supreme Court, giving the case somewhat more authority that Mike H.'s most recent rumors and unschooled opinions.)

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Lee
Thank you for taking the time to share this useful information with us, f! I have seen this ridiculous "table funded" argument being presented at other sites and we have seen Mike H. present this senseless argument here at the Forum.

Anyone who is making this argument -- such as Sharon -- identifies themselves a gullible at best and dishonest at worst. I have a feeling that "Sharon" is really just Mike H. posting under another name.
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Tony
The "table funded" loan argument seems to be a new variant on the totally discredited "vapor money" defense peddled together with Quiet Title scams by swindlers for years.
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Floyd
Quote:
The "table funded" loan argument seems to be a new variant on the totally discredited "vapor money" defense peddled together with Quiet Title scams by swindlers for years.


This is a very astute observation, Tony. I think that you hit this one dead on.

We probably need a thread discussing the Vapor Money scam, which has often been packaged along with a Quiet Title cause of action. Given the number of cases in which these theories have been rejected, it is unsurprising that the scam artists are repackaging these failed arguments in a new "table funded" format.
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I have never said that "table funding" per se is wrong. The
problem sometimes arises in how it was done.
Table funding works like this, A=correspondent lender with
a line of credit with B=warehouse lender. C=borrower.
C borrows money from A, who then endorses the Note and assigns
the mortgage to B. That's the way it is supposed to happen.
However, sometimes C gives the Note to A and the mortgage to
B. The Note remains with A.
Later, B assigns the mortgage to D who then tries to foreclose
some time later after an alleged default by C (the maker of the
Note,ie borrower). D doesn't have the Note so they fabricate one
or do a lost note affidavit.
Meanwhile, A had the Note all along or else sold or hypothecated it to some unknown third party.
The loan contract is between borrower C and lender A. The
contract never got transferred to B, so it could not transfer
to D what it never had. Therefore D has no standing to foreclose.
The way to find out if this happened is to look at the HUD
addendum to the loan application. Box 15 shows the true lender.
Also, look at the HUD closing statement. Whoever got the YSP
(POC) paid outside closing, is the true lender. (Check to make
sure they were licensed, almost always, they were)
Now look in box 16 on the HUD addendum, that is usually the
sponsor/agent, ie "warehouse" lender. Very often, they were not
licensed so they should not be listed as the lender on the Note
nor the mortgage.
If the "true licensed lender" is not on the mortgage, it means
the lien was never "perfected" in the name of the "true lender".
That means the Note is unsecured, and no foreclosure should be
possible.
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registered
If someone could give me insight on this Countrywide funding, I would appreciate the help:

Small town Lender A produced in discovery a commitment confirmation letter, stating that Lender A and CHL, Inc. entered a "binding agreement": CHL, Inc agreed to buy and Lender A agreed to sell and deliver the loan (delivery set for the next day after closing). Commitment letter was written on Countrywide Correspondent Lending letterhead, but confirmed purchase commitment by CHL, Inc. An attachment of funding instructions for the lender, from Bank of New York, noted if the loan did not close on the day scheduled, the title agent must wire the funds back to Bank of New York within one day, and credit given to CW Warehouse Lending. But then, when an alleged original note was produced in discovery, the first assignee from the original lender was CW Bank, NA. The second indorsee was the presale party CHL, Inc. who then assigned "to blank" and now the note is allegedly in possession of BAC Home Loans Servicing, LP, who is suing. In 2011, FNMA lookup tool said FNMA owned the loan, but a few days ago, the lookup tool says FNMA does not own the loan. Foreclosure has been ongoing for more than a year.

I am curious about why Lender A was never mentioned in the funding instructions. The funds had to be wired back to BoNY if closing was delayed, yet instead of the original lender, CW Warehouse Lending was to be credited when the funds were returned. How in the world did Bank of New York and CW Bank, NA enter the picture? If anyone would try to help me understand, I would be grateful. Why is CW Bank, NA the first assignee on the note instead of CHL, INC., the party who committed to buy and accept delivery the next day? Also, the closing instructions show that the original lender assigned three loan numbers to the same loan at closing. The loan number referenced in the suit is not the same number as the loan number on the recorded mortgage.

The note indorsement to CW Bank,NA then to CHL,Inc. and CHL, Inc. in blank, appeared on version four of the note. Each version enhanced the indorsements, coinciding with appeals decisions that were unfavorable to the version on file when the decisions were published. First no indorsement, then one indorsement on a separate and unnumbered sheet of paper, then one indorsement ON the note but without an assignee, then with assignee blank completed and two more indorsements added. All rubber-stamped and undated.

I know table funding is legal, but I'm just confused how this particular loan seemed to omit the original lender in the funding, but the original lender seemed to have delivered the one note to two CW entities.
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The HUD addendum to the loan application is the key to understanding what SHOULD have happened.
The "obligation" is supposed to be "evidenced" by the Note &
Mortgage, but sometimes, they do not agree, either because
the title company screwed up or because of something more sinister, ie a "Ponzi note" was created.
When the "obligation" between the two parties to the contract
does not agree with the Note & Mortgage, it is the "obligation"
ie true contract which controls.
Having studied many "Countrywide" loans, it is my opinion that
they were definitely running a "Ponzi scheme" and selling the
same Notes to multiple different investors. Based on what you
describe, it appears that is what happened in your case.
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Floyd
Quote:
The HUD addendum to the loan application is the key to understanding what SHOULD have happened.
The "obligation" is supposed to be "evidenced" by the Note &
Mortgage, but sometimes, they do not agree, either because
the title company screwed up or because of something more sinister, ie a "Ponzi note" was created.
When the "obligation" between the two parties to the contract
does not agree with the Note & Mortgage, it is the "obligation"
ie true contract which controls.
Having studied many "Countrywide" loans, it is my opinion that
they were definitely running a "Ponzi scheme" and selling the
same Notes to multiple different investors. Based on what you
describe, it appears that is what happened in your case.


Mike H.'s "opinion" is of no value whatsoever. This fool is simply a swindler who continuously espouses various conspiracy theories and unfounded assertions of "double pledging" and "Ponzi schemes". Anything posted by this fool should be disregarded by any thinking person.
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Floyd
Quote:
If someone could give me insight on this Countrywide funding, I would appreciate the help:

Small town Lender A produced in discovery a commitment confirmation letter, stating that Lender A and CHL, Inc. entered a "binding agreement": CHL, Inc agreed to buy and Lender A agreed to sell and deliver the loan (delivery set for the next day after closing). Commitment letter was written on Countrywide Correspondent Lending letterhead, but confirmed purchase commitment by CHL, Inc. An attachment of funding instructions for the lender, from Bank of New York, noted if the loan did not close on the day scheduled, the title agent must wire the funds back to Bank of New York within one day, and credit given to CW Warehouse Lending. But then, when an alleged original note was produced in discovery, the first assignee from the original lender was CW Bank, NA. The second indorsee was the presale party CHL, Inc. who then assigned "to blank" and now the note is allegedly in possession of BAC Home Loans Servicing, LP, who is suing. In 2011, FNMA lookup tool said FNMA owned the loan, but a few days ago, the lookup tool says FNMA does not own the loan. Foreclosure has been ongoing for more than a year.

I am curious about why Lender A was never mentioned in the funding instructions. The funds had to be wired back to BoNY if closing was delayed, yet instead of the original lender, CW Warehouse Lending was to be credited when the funds were returned. How in the world did Bank of New York and CW Bank, NA enter the picture? If anyone would try to help me understand, I would be grateful. Why is CW Bank, NA the first assignee on the note instead of CHL, INC., the party who committed to buy and accept delivery the next day? Also, the closing instructions show that the original lender assigned three loan numbers to the same loan at closing. The loan number referenced in the suit is not the same number as the loan number on the recorded mortgage.

The note indorsement to CW Bank,NA then to CHL,Inc. and CHL, Inc. in blank, appeared on version four of the note. Each version enhanced the indorsements, coinciding with appeals decisions that were unfavorable to the version on file when the decisions were published. First no indorsement, then one indorsement on a separate and unnumbered sheet of paper, then one indorsement ON the note but without an assignee, then with assignee blank completed and two more indorsements added. All rubber-stamped and undated.

I know table funding is legal, but I'm just confused how this particular loan seemed to omit the original lender in the funding, but the original lender seemed to have delivered the one note to two CW entities.


There is a very simple and straightforward explanation to the facts you relate which involves no mischief and nothing out of the ordinary whatsoever. The facts are not suggestive of any fraud, illegality or even of irregularity.

It has been common in mortgage banking for larger mortgage banking enterprises to originate production through both "retail" and "wholesale" channels. The "retail" lending involves the mortgage banking entity taking applications through its own employees, with the loans processed and underwritten in house. By contrast, the wholesale operation, also referred to as "correspondent lending" involves making loans through smaller mortgage banking entities.

The smaller mortgage banking entities might be small banks, savings and loans or credit unions without sufficient mortgage banking volumes to justify full scale mortgage banking operations. These also include smaller mortgage banking concerns lacking the resources to engage in a broader range of mortgage banking operations.

Larger mortgage lenders do not typically lend their own money. Instead, the loans are actually funded using funds advanced by a so-called warehousing lender. Mr. Roper has explained this in previous posts and what I have since read in mortgage industry publications and books about mortgage banking fully supports his explanation.

When a larger lender makes a loan, the lender draws against a credit line with the warehousing lender and the funds from this credit line are sent to the title company or other closing agent and placed in an escrow account to fund the loan at closing.

Terms of the warehousing credit line typically require the promissory note, indorsed in blank, to be sent to the warehousing lender within 72 hours (3 business days) of closing. The warehousing lender is not buying the loan. Instead, the note is simply being pledged as additional security for the repayment of the warehousing loan. This loan is actually repaid by the mortgage banker when the loan is sold to a GSE or sold into securitization. This uniformly happens within sixty days of closing.

As part of their wholesale -- correspondent lending -- operations, larger lenders evaluate loans for prospective purchase from smaller correspondent lenders and enter into a written commitment to purchase loans. Often, a part of the purchase commitment involves extension of a so-called "captive warehousing line of credit" to the smaller correspondent lender.

The line is "captive" in the sense that unlike a general warehousing line that the larger mortgage banker can use to fund pretty much any residential mortgage loan for ultimate sale to any secondary mortgage market investor, the captive warehousing line is available solely to fund the specific agreed upon loan which the larger mortgage banker has committed to purchase.

Given the size and scale of Countrywide, it had its own affiliated bank, which acted as the mortgage banking concern's primary warehousing lender. That is CHL, Inc. would make the loan, but it would draw against a warehousing account with Countrywide Bank to fund the loan. Even though affiliated, CHL, Inc. would still indorse and deliver the notes to Countrywide Bank. Countrywide bank was NOT buying the loan. Rather, Countrywide was simply loaning its corporate affiliate the funds to make the loan and taking the note as collateral. Thus the first negotiation of the note -- by indorsement and delivery -- to Countrywide Bank. Upon sale, the note would be renegotiated to CHL, Inc., which would sell the loan to an institutional mortgage investor, either a GSE or a RMBS trust. These sales involved indorsement in blank and physical delivery to the institutional custodian holding the actual notes for the investor.

In respect of the role of Bank of New York, another different kind of corresponding relationship comes into play. This is something better known to and understood by those who are older and who remember banking before the national consolidation and integration into a much smaller number of dominant national players.

Think of a small bank in a small town. That small bank may be the dominant bank in its own market. It might even be the only bank in town. If one customer in town writes a check on that bank and presents the check to another person or entity also banking at that same small bank, the check clears internally. The check need never leave the bank. Money is taken from one account and put into another account.

For many local transactions, check can clear without leaving the bank. But for checks sent entities out of town, those checks are going to be presented to the recipients bank and are going to clear through the recipient's bank to be ultimately presented for payment to the small town bank.

But it is inherently inefficient for such a small bank to have relationships with every other bank in the U.S. In fact, it is inefficient for such a bank to even have direct check clearing arrangements with more than a handful of other banks. For this reason, a very small bank will often have so-called corresponding relationships with one to three much larger banks in commercial centers in the bank's home state and possibly an additional corresponding relationship with perhaps one money center bank.

When checks are drawn against the small bank, based upon these pre-existing corresponding relationships, the checks actually clear and are paid through the corresponding banking. This is far more efficient because like commercial airline hubs check clearing can be concentrated through a smaller number of banks acting as financial hubs. Instead of exchanging checks and credits with each and every other small bank, each small bank clears only through much larger banks and the larger banks settle the checks amongst these smaller banks.

Now, back to Countrywide Bank, realize that Countrywide Bank, though quite large in terms of assets was never really a full service commercial bank with a large retail presence. Instead, it was a large boutique bank that gave Countrywide some of the deposit gathering privileges of a banking charter and allowed Countrywide to gather large FDIC insured deposits from institutional customers to fund Countrywide's operations. But Countrywide never had any vast check clearing operations, so it relied on other banks, like BNY to handle its check clearing and wire funding operations.

Because Countrywide is large and sinister, it is harder to imagine it using the simple expedient of another larger commercial bank for these routine check/wire clearing operations, but this was really far more economic than setting up its own check/wire clearing operation given the very limited presence of Countrywide Bank in this aspect of commercial banking.

The bottom line is that while Countrywide was clearly a large criminal enterprise, the transactions you describe are not sinister or questionable at all. This is an unproductive avenue for your defense in a case involving Countrywide/BAC.

Also, bear in mind that most foreclosure mills and most courts do not understand the information I have related above. It is important that you understand the underlying reality of these transactions so that you do not go too far down one of the wingnut paths advocated by scam artists like Mike H. If you drift off into this "vapor money" nonsense, you WILL LOSE. If, by contrast, you hold the plaintiff to its ordinary burdens of proof, as Mr. Roper has suggested in several insightful posts, you may still be able to use some of the unusual facts to create fact issues to preclude summary judgment.

Most witnesses produced by the banks can never describe these transactions with the simplicity or clarity I have set forth above. If you can get to trial and the banks send some robo-signing flunky, you may still be able to confuse and befuddle the witness sufficiently to prevail. Just avoid drifting off into wingnut never-never land!
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Maurice
Quote:
There is a very simple and straightforward explanation to the facts you relate which involves no mischief and nothing out of the ordinary whatsoever. The facts are not suggestive of any fraud, illegality or even of irregularity.

It has been common in mortgage banking for larger mortgage banking enterprises to originate production through both "retail" and "wholesale" channels. The "retail" lending involves the mortgage banking entity taking applications through its own employees, with the loans processed and underwritten in house. By contrast, the wholesale operation, also referred to as "correspondent lending" involves making loans through smaller mortgage banking entities.

The smaller mortgage banking entities might be small banks, savings and loans or credit unions without sufficient mortgage banking volumes to justify full scale mortgage banking operations. These also include smaller mortgage banking concerns lacking the resources to engage in a broader range of mortgage banking operations.

Larger mortgage lenders do not typically lend their own money. Instead, the loans are actually funded using funds advanced by a so-called warehousing lender. Mr. Roper has explained this in previous posts and what I have since read in mortgage industry publications and books about mortgage banking fully supports his explanation.

When a larger lender makes a loan, the lender draws against a credit line with the warehousing lender and the funds from this credit line are sent to the title company or other closing agent and placed in an escrow account to fund the loan at closing.

Terms of the warehousing credit line typically require the promissory note, indorsed in blank, to be sent to the warehousing lender within 72 hours (3 business days) of closing. The warehousing lender is not buying the loan. Instead, the note is simply being pledged as additional security for the repayment of the warehousing loan. This loan is actually repaid by the mortgage banker when the loan is sold to a GSE or sold into securitization. This uniformly happens within sixty days of closing.

As part of their wholesale -- correspondent lending -- operations, larger lenders evaluate loans for prospective purchase from smaller correspondent lenders and enter into a written commitment to purchase loans. Often, a part of the purchase commitment involves extension of a so-called "captive warehousing line of credit" to the smaller correspondent lender.

The line is "captive" in the sense that unlike a general warehousing line that the larger mortgage banker can use to fund pretty much any residential mortgage loan for ultimate sale to any secondary mortgage market investor, the captive warehousing line is available solely to fund the specific agreed upon loan which the larger mortgage banker has committed to purchase.

Given the size and scale of Countrywide, it had its own affiliated bank, which acted as the mortgage banking concern's primary warehousing lender. That is CHL, Inc. would make the loan, but it would draw against a warehousing account with Countrywide Bank to fund the loan. Even though affiliated, CHL, Inc. would still indorse and deliver the notes to Countrywide Bank. Countrywide bank was NOT buying the loan. Rather, Countrywide was simply loaning its corporate affiliate the funds to make the loan and taking the note as collateral. Thus the first negotiation of the note -- by indorsement and delivery -- to Countrywide Bank. Upon sale, the note would be renegotiated to CHL, Inc., which would sell the loan to an institutional mortgage investor, either a GSE or a RMBS trust. These sales involved indorsement in blank and physical delivery to the institutional custodian holding the actual notes for the investor.

In respect of the role of Bank of New York, another different kind of corresponding relationship comes into play. This is something better known to and understood by those who are older and who remember banking before the national consolidation and integration into a much smaller number of dominant national players.

Think of a small bank in a small town. That small bank may be the dominant bank in its own market. It might even be the only bank in town. If one customer in town writes a check on that bank and presents the check to another person or entity also banking at that same small bank, the check clears internally. The check need never leave the bank. Money is taken from one account and put into another account.

For many local transactions, check can clear without leaving the bank. But for checks sent entities out of town, those checks are going to be presented to the recipients bank and are going to clear through the recipient's bank to be ultimately presented for payment to the small town bank.

But it is inherently inefficient for such a small bank to have relationships with every other bank in the U.S. In fact, it is inefficient for such a bank to even have direct check clearing arrangements with more than a handful of other banks. For this reason, a very small bank will often have so-called corresponding relationships with one to three much larger banks in commercial centers in the bank's home state and possibly an additional corresponding relationship with perhaps one money center bank.

When checks are drawn against the small bank, based upon these pre-existing corresponding relationships, the checks actually clear and are paid through the corresponding banking. This is far more efficient because like commercial airline hubs check clearing can be concentrated through a smaller number of banks acting as financial hubs. Instead of exchanging checks and credits with each and every other small bank, each small bank clears only through much larger banks and the larger banks settle the checks amongst these smaller banks.

Now, back to Countrywide Bank, realize that Countrywide Bank, though quite large in terms of assets was never really a full service commercial bank with a large retail presence. Instead, it was a large boutique bank that gave Countrywide some of the deposit gathering privileges of a banking charter and allowed Countrywide to gather large FDIC insured deposits from institutional customers to fund Countrywide's operations. But Countrywide never had any vast check clearing operations, so it relied on other banks, like BNY to handle its check clearing and wire funding operations.

Because Countrywide is large and sinister, it is harder to imagine it using the simple expedient of another larger commercial bank for these routine check/wire clearing operations, but this was really far more economic than setting up its own check/wire clearing operation given the very limited presence of Countrywide Bank in this aspect of commercial banking.

The bottom line is that while Countrywide was clearly a large criminal enterprise, the transactions you describe are not sinister or questionable at all. This is an unproductive avenue for your defense in a case involving Countrywide/BAC.

Also, bear in mind that most foreclosure mills and most courts do not understand the information I have related above. It is important that you understand the underlying reality of these transactions so that you do not go too far down one of the wingnut paths advocated by scam artists like Mike H. If you drift off into this "vapor money" nonsense, you WILL LOSE. If, by contrast, you hold the plaintiff to its ordinary burdens of proof, as Mr. Roper has suggested in several insightful posts, you may still be able to use some of the unusual facts to create fact issues to preclude summary judgment.

Most witnesses produced by the banks can never describe these transactions with the simplicity or clarity I have set forth above. If you can get to trial and the banks send some robo-signing flunky, you may still be able to confuse and befuddle the witness sufficiently to prevail. Just avoid drifting off into wingnut never-never land!


Floyd this is a really helpful post. Since Mr. Roper left the Forum, we rarely have someone who can explain the mechanics of mortgage banking and what is really going on. It is refreshing to have a clear easily understood explanation to get us past the b.s. posted by the likes of Mike H. I appreciate you taking the time to explain this.

Thanks!!!!
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Maurice
Mr. Roper really laid out this process in this post from the thread "How to track who actually owns your security":

http://ssgoldstar.websitetoolbox.com/post/show_single_post?pid=25748910&postcount=3
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t
It was good of f to post this thread and clarify that the "table-funded" argument is simply a variant on the regular debt elimination scam. Neil Garfield is one of the principal swindlers enunciating this nonsense. Mike H. has tried several times before to post this garbage at the Forum. Mr. Roper, ka and others have taken both Garfield and Mike H. to task over but the swindlers make enormous sums of money peddling scams based upon this misinformation, so it is little wonder that they would send another shill like Sharon to try to resurrect and defend this absurd argument.
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