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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James
I can't be too specific yet, A Bankruptcy Attorney tells me he has new client that is current on his note, with a TARP bank. The Bank is calling his note to the tune of 240 million. Attorney's client has no choice but to go into Bankruptcy, which means the Bank will not get any money for the next year until after the case goes through the courts. Also the debt will get written down and there will be no interest on the payback.
Please explain, how the Bank could benefit by forcing the borrower into Bankruptcy when he is current on his loan and would have no problem continuing to pay.

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Stephen

My bank, Guaranty Bank, did it to me.  They want his equity and destroying his credit insures he can't get financing from anyone else.

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James
Steven,
Maybe, but the BK Judges in Fl. have no  tolerance for the Banks right now. If their aim is to get his property,they have miscalculated. It is much more likely that the property owner will get the loan written down.
I am playing loose here, but is there some sort of government back stop for the banks that would pay them for a default or maybe AIG insurance?
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greg collins
Tarp is all about getting the taxpayers to pay off toxic debt allowing lenders and investors keep fraudulently derived assets and to protect the interests of foreign investors and governments.

There a couple basic ways to make money from throwing loans into default. Home mortgages were converted into residential mortgage backed securities which in turn created backing for CDO's collateralize debt obligations worth many times the value of the mortgage that backed them usually around 30-60 times. The math doesn't necessarily work out in this manner since derivatives based financial instruments back each other but lets say $100,000 loan was originated and sold on the secondary and converted into derivatives based financial based instrument right there on one tile claim you have 3-6 million in derivatives, we all know ms fraud frequently involves multiple title claims so that's an additional multiplier.

Another more simple and easier to calculate method is to merely take out credit insurance on the notes and default on them this is really no different than taking out fire insurance and burning down the insured property they key difference being they have "burned" trillions of dollars worth of U.S citizens homes to get the CDS (credit default swaps payouts.

Many major economist and investors have addressed this inclusive of Warren Buffet, George Soros, and Nouriel Roubini. Here is a quote from an essay by George Soros.


http://www.ft.com/cms/s/0/b62b1bd4-5aa3-11de-8c14-00144feabdc0.html?nclick_check=1

 

The three steps to financial reform


"Custom-made derivatives only serve to improve the profit margin of the financial engineers designing them. In fact, some derivatives ought not to be traded at all. I have in mind credit default swaps. Consider the recent bankruptcy of AbitibiBowater and that of General Motors. In both cases, some bondholders owned CDS and stood to gain more by bankruptcy than by reorganisation. It is like buying life insurance on someone else’s life and owning a licence to kill him. CDS are instruments of destruction that ought to be outlawed."



This whole basic scam was engineered by Andrew Fastow while at Continental Illinois and the whole purpose of securitizing mortgages was to create off the books assets. Fastow was hire by Enron to do on a small scale what has been done to the whole U.S. mortgage industry although the majority of the criminal activity was focus on sub-prime and alt-a because it was easy to blame the borrowers for the banks ponzi scheme artificial for the public books "losses" the scam was prevalent throughout the system.

The commercial property equivalent of RMBS residential mortgage backed securities is CMBS (commercial mortgage backed securities).

There are couple major problems with prosecuting this type of fraud. One is thousands of Wall street investment bankers, commercial bankers, servicers, originators, realtors, senators, governors, ex-Presidents etc. etc. would be subject to very serious crimes involving multiple life sentences and quite probably the death penalty.

Another issue is that Tarp transferred sole legal authority and control over U.S. mortgage based assets to the secretary of the treasury who has been given unlimited powers Paulson formerly of Goldman Sachs delegated some of that authority back to those who stole the assets in the first place, the Fed, Hud etc. Timothy Geithner is now the Secretary of the Treasury and all Tarp assets are under his authority.

So our choices seem to be pretty basic run our cases though kangaroo court and hope they award us a settlement to avoid attracting to much attention to the financial dictatorship, demand President Obama restore a Constitutional government recover recoverable assets and write down fraudulent debt, military takeover on the basis of
domestic enemies in government and financial institutions, Citizens restoration of the Constitution and property rights, wait until next election cycle and pick valid candidates, restore sovereignty to the states and recover stolen assets and force right downs which is Constitutional as well, although it didn't work out to well for the south during the civil war  the looting of the U.S. is an issue affecting all states,
force or ask state and local judges and law enforcement to enforce true Constitutional law or at the least by-pass the fraudulent Tarp agreement using taxpayer dollars to pay off fraudulent "losses".

There is a fly in the ointment of just plain writing down the bad debt and recovering assets and that's the issue of foreign investors backing our massive speculation, spending, and debt driven economy over the last 16 or so years, they now have say so over our government, financial industry and of course mortgages, and credit so U.S. citizens have given up part of our sovereignty to foreign interests on top of permitting the installation of a domestic financial dictatorship by not confronting ms fraud and related financial fraud, that may be a stickier issue to resolve than the domestic money laundering trail.
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Knows About Panics
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I can't be too specific yet, A Bankruptcy Attorney tells me he has new client that is current on his note, with a TARP bank.  The Bank is calling his note to the tune of 240 million. Attorney's client has no choice but to go into Bankruptcy, which means the Bank will not get any money for the next year until after the case goes through the courts. Also the debt will get written down and there will be no interest on the payback.

 
James:
 
There is also a totally nonsinister explaination which is far more likely than the conspiracy theories presented by others here.
 
Depository financial institutions are required to to maintain certain minimum capital levels.  These used to be absolute minimum capital ratios, but a couple of decades ago after the savings and loan debacle, regulation shifted to risk based capital requirements.  Some of these were internationally implemented as part of the Basil Accords.
 
Though the capital levels are very complex, permit me to use a simple example.
 
Suppose that the capital requirement was a flat 7% of all ban assets.  That would mean that a bank with $100 billion in assets would have to maintain a capital level of $7 billion.
 
Now, suppose that the financial institution loses $3.5 billion as a consequence of its imprudent investments in toxic mortgage backed securities.  Recognition of the loss means that its assets diminish to $96.5 billion and its capital is cut in half to $3.5 billion.
 
As a consequnce of the loss, the bank no longer meets regulatory capital standards.
 
Such a bank may be subject to seizure by the FDIC!
 
There are three ways to correct this capital problem, only two of which are actually practical in this economic climate.  These are:  (1) replace the lost capital by sale of new stock, (2) replace the lost capital through new earnings, and (3) shrink the assets of the bank.
 
Replacing capital through new earnings isn't really a short term solution when losses continue to mount.  To the contrary, this quarter's losses are compounded by additional losses and capital problems the next quarter.
 
Investors in stock of financial concerns have really taken a haircut and those who bailed out banks last year have mostly lost more money.  Attracting new capital dillutes the ownership of existing shareholders and can be very difficult in these times.
 
Shrinking the bank is another approach.  But consider just how much the bank has to shrink in the scenario given above.  The loss of half the bank's capital requires the bankto shrink its assets by half.
 
Most of the assets of commercial banks are invested in commercial loans.  And these loans can be hard to sell, particularly when many banks are having capital problems.
 
But most of these loans are also written for fairly short terms, usually one year or less.  The way that banks shrink is by NOT RENEWING THEIR EXISTING LOANS.
 
This is done without regard to the creditworthiness and payment ability of the debtor.  The bank generally should call the least profitable loans and leave the most profitable loans in place.  Very often the larger loans are more competitive and therefore less profitable for banks on a percentage basis than smaller loans.
 
And you have to call far fewer $240 million loans to reduce assets by $48 billion than you do with respect to credit card lines with $2,000 to $5,000 balances.
 
This bank capital problem creates additional liquidity problems throughout the economy and was one of the key reasons why President Obama's stimulus bill was NEVER GOING TO WORK.
 
That bill was crafted as a giveaway to his campaign contributors on Wall Street.  Your the politicians in power will shake down your friend to get paid off before passing any bill that gives HIM a fair shake.
 
Your friend who is a bankruptcy attorney should make out very well!  There should be plenty of business for him over the next few years as the Democratic Party wrecks the economy and completes a socialist makeover of America!
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James
I will forward this link to my Attorney friend. I think he will find it quite interesting and no longer mysterious.
It's nice to be associated with such knowlegable people. Thanks All.
By the way, he is very busy and making much money, never the less he is making plans to leave the Country, as he is sick of the insanity.

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Knows about your explanation is just plain incorrect the reason for the calls has been thoroughly explained  and proven by major media publications, economists, Senate and Congressional investigations, etc. etc. no offense but it’s been thoroughly proven that loans were made designed to fail or at the least made out side of lending requirements , rating agencies and Wall street investment banks collaborated on bumping up the volume of loan and loan ratings to create securities. It makes no sense to beat a dead horse that a handful of greedy unregulated bankers made to many loans and now they need to recapitalize.

Even if in this case there is not fraud to cover up the loans are being called to cover up other fraud and have the taxpayers foot the bill. The explanation of calling loans to increase capital requirements makes no senses at why on earth would the government pay off bad debts criminal or not instead of just plain injecting liquidity
into the system though the fractional reserve system. That 7 trillion that has been transferred to cover debts that aren't even valid could have been used to inject about 100 trillion dollars in liquidity into the system and people could have kept there homes and businesses instead of foreclosures and shutting down businesses which are contributing to the self feeding cycle.

What's happening now is a repeat of what happened during the great depression though this current crisis is on a much bigger scale both in terms of volume and as percentage of debt ratio to GDP. Wall Street insiders called margin loans causing a collapse which spread to banks to cover the margins and the Fed contracted the credit. Sure some of the details are different but the principle is the same the government and the Fed knows there actions will cause increased foreclosures and business losses and a contraction in the credit. IN a fractional reserve system the loans are the capital, debt is money so calling loans and foreclosing creates a self feeding contraction in both the monetary system and of course causes the public to lose jobs, housing and capital to inject into the system.

As far a blaming the Democrats I'm a lifelong Republican and have always and still do maintain that funding social programs contributes to the deficit which causes tax money to be spent on interest payments to the banks rather for government expenditures as most people imagine when they merrily send off their check to the IRS to pay for military, roads, schools etc. Social security gets used as a slush fund to write IOU's against to make the budget short falls appear less that they really are, and of course give the FED/IRS system more capital to work with, and less for us to keep for ourselves.

As far a purely blaming the Democrats that couldn't be further from the truth it was Bush that oversaw the largest expansion of government authority and spending in the history of the U.S.

I filled Rico (Mafia) charges in Federal court in order to derail the financial crises before it happened by getting Ameriquest the largest sub-prime lender in the country shut down before they and other subprime lenders looted the economy by securitizing loans designed to fail and collecting on the credit default swaps by intentionally manufacturing defaults and foreclosing as many loans as possible. George Bush received millions in donations laundered though 53 shell corporations all from the sole source and sole owner of Ameriquest Roland Arnall and in return made Roland Arnall the ambassador of the Netherlands in order to evade, investigation, prosecution, and restitution to the victims.

 

So the biggest single immediate factor in the current collapse was Bush letting Roland Arnall off the hook as the nation’s largest contributor to the toxic and illegal loans that buried our economy in exchange for illegal political donations to his campaign consisting of money that was stolen in the first place. Had Bush not sheltered Ameriquest the largest originator of fraudulent and high risk loans that may have set a precedent to go after the other crooks before the economy collapsed instead of arguing about solution after a totally avoidable crisis? How that is not a fascist/socialist for the executive branch to give immunity to crooks looting billions from the U.S. citizens forcing taxpayers on the hook for the damages and lost revenue?

It was Bush who pushed an increase in homeownership to the point where half the loans in the whole country were government sponsored lenders, his response to the bad loans sponsored by Fannie and Freddie was to just plain take over the GSE's how is that not a socialist policy to have the government sponsor half the loans in the whole country?

How is not a socialist/fascist policy to allow Paulson an investment banker from Goldman Sacks dictatorial control over private assets?

We can't fix the country and get it on the right track by lying, historical revision. Sticking our heads in the sand or placing the blame on others. To call the Democrats socialist I believe is correct since they advocate the progressive tax rate and a large social services program but the fact is the Neo-cons under Bush expanded socialism far more that any other Democrats could has possible gotten away with while people were distracted by the war on terror which has absolutely nothing to do with the massive expansion of government sponsored lending and the cover up of lending fraud leading to the current economic meltdown.

 

I’m a lifelong Republican, Ron Paul precinct leader and was selected as a Republican Federal election Judge I know first hand Bush, McCain and the neo-cons had the majority of people with traditional conservative and Christian political platforms labeled as extremists, domestic terrorists, terrorist supporters and all sorts of lunacy. But guess what it didn’t stop there was actually harassment, false arrests, intimidation, and outright vote rigging to stop a massive influx of millions to the Republican party to support traditional Republican values. The Neo-cons Bush and McCain decided the sole focus of the country would be perpetual war with radical Islam and to hell with the rule of law, property rights, the economy, jobs, homes, bank fraud, foreign interests buying banking and political influence, Illegal immigration bankrupting schools and hospitals causing crime waves and filling up our prisons and providing and avenue for Islamic extremists illegally entering our country through the unsecured borders.

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First:  report that attorney to the bar association for ethics violation. 

Second:  You are talking about Florida.  Need I say more when it comes to the bankruptcy system there?

Third.  A lender may foreclosure for a host of reasons, regardless of your payment status. 

a)  delinquent property taxes

b)  no property insurance

c)  whatever other clause is in the note that the borrower may have violated.



James wrote:
I can't be too specific yet, A Bankruptcy Attorney tells me he has new client that is current on his note, with a TARP bank. The Bank is calling his note to the tune of 240 million. Attorney's client has no choice but to go into Bankruptcy, which means the Bank will not get any money for the next year until after the case goes through the courts. Also the debt will get written down and there will be no interest on the payback.
Please explain, how the Bank could benefit by forcing the borrower into Bankruptcy when he is current on his loan and would have no problem continuing to pay.

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Knows About Panics
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Knows about your explanation is just plain incorrect the reason for the calls has been thoroughly explained  and proven by major media publications, economists, Senate and Congressional investigations, etc. etc. no offense but it’s been thoroughly proven that loans were made designed to fail or at the least made out side of lending requirements , rating agencies and Wall street investment banks collaborated on bumping up the volume of loan and loan ratings to create securities.  It makes no sense to beat a dead horse that a handful of greedy unregulated bankers made to many loans and now they need to recapitalize.


Greg:

I was NOT denying that mortgage servicers are engaged in fraud as is extensively discussed throughout this site.  Nor would I contend that many of the toxic mortgage products were designed for anything other thatn failure.

Instead, I was responding to a query from a single individual -- James -- who expressed dismay that a large commercial loan would be called (if that is indeed what happened).  I expect that it is ore likely that the loan is simply NOT BEING RENEWED, which is still pretty much a distinction without a difference as to the continuity of the dependent business.

This is precisely the sort of liquidity trap that created problems and extended the economic downturn during what was previously known as the "Great Depression".  Check your history. 

You are confusing the fractional reserve requirement with bank capital requirements.  Go check your textbooks again.  The Fed can inject all the reserves it wants to.  This DOES NOT ALTER the bank's capitalization problem. 

The U.S. Government HAS done some things to assist the banks with their balance sheets and capital problems.  TARP is one approach.  Changes to GAAP accounting rules which allow these financial institutions to CONCEAL their losses is another.  Unfortunately, like the poor supervisory management during the Savings and Loan crisis a generation ago, this regulation has been designed to favor the administration's friends at taxpayer expense. And by FAILING TO SIMPLY CLOSE the undercapitalized banks, the problem is postposed for another year and will reemerge at a whole new bailout price level.

Sorry you do not like my answer.  Finance is my field.

I find nothing in your most recent post that would alter my analysis or which would require further comment.  
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Sorry if we misunderstood each other I wasn't trying to write  a treatise on fractional reserve lending I think the point you are trying to make is that Fed fractional reserve requirements are entirely different than capital requirements for individual banks I don't disagree with that at all . Personally I think the term fractional reserve as applied to the Fed is self contradictory non-sense as there is no hard money backing and the Reserve ratio if it can be called that is determined as much by the power to tax and confidence in the dollar. In one respect is could be considered infinite because it is backed by decree. I know that can open a whole can of worms with all sorts of Economists and bankers arguing back and forth to the end of time so we'll leave it at that.

As far as capital requirements for individual banks yes they are specific terms even a couple sets of specific terms but really no matter how complex the terminology or concise the specifics are its still a measure of solvency or liquidity of an individual banks based on loans its allowed to have v assets to conduct fractional reserve lending.

  The main point I am trying to make to James and to everyone really, the foreclosures triggered a leveraged loss and systemic collapse the loans would not have to be called had it not been for the systemic collapse caused by imprudent and outright illegal in many cases lending and investing practices. Is the loan James referring to being called to evade fraud, I have no idea if it is and if it is what type of fraud.

In terms of paying of the bad debts at a one to one ratio I stand by that it's illegal and Unconstitutional on many levels in the first place and second we don't even know what debts are owed, and if the taxpayer fund are being used to sponsor or facilitate crime, there seems to be little to no accountability, the same crooks that caused the crises and are very likely to have engaged in actual crimes of design/ and or crimes of negligence have been granted authority to resolve the issue using taxpayers money. Even if it was necessary and all parties were trustworthy it's very difficult to come up with any Constitutional basis for the IRS being able to take taxpayers assets and give them to private individuals and businesses, although paradoxically these businesses and businessman have been granted a state sponsored monopoly. The public/private money trail is such  a mess many statements and descriptions seem to be both false and true at the same time. Example have the banks been granted extended private power to run the government or the government been granted state control over private banks. There has been a fundamental shift in Private v governmental roles with very little debate and very little thought as to what caused the mess who did it and why just a shotgun blast of massive and unprecedented amounts of taxpayer money thrown at the very same people and institutions that caused the mess.

Since the Constitution and property rights issues were bypassed anyways it would make far more sense to allow businesses to stay solvent and homeowners to maintain homes for one the issue of property rights hasn't even been addressed how much of the capital belongs to the home and business owners and how much to the banks has not been addressed.

From the practical matter of economic recovery and liquidity I'm not talking about artificially boosting the economy with massive injection of capital I'm talking about maintaining home ownership and business ownership so the government can continue to collect revenues, banks interest payments and yes be able to raise capital to boost capital requirements, how could they do that in a collapsed economy with a collapsed dollar since the value of the dollar is based on confidence and the power to tax in the first place.

I'm very, very disturbed by the attitude the last 8 years that we didn't like what we had to do and it may not have been fully legal but it had to be done or else. That's the funny thing about being responsible and doing things the right way it may seem impossible to do or to hard at first but if you do the right thing and work though the issue in the end it works out much better than choosing the end justifies the means because we had no other choice method.

We can't borrow, tax and spend to fix and issue caused by borrowing, taxing and spending and we can't fix an issue caused by breaking the law by breaking even more laws especially Constitutional fundamentals of the power of the people.

Politically I'm a Constitutional fundamentalist in terms of economics I'm a hard money advocate, and believe in low or no Federal taxes which the Constitution as I read seems to make clear is the fundamental basis of freedom from feudalism and dictatorship. I maintain as does the Constitution and many modern economists that a fixed value hard money currency is inseparable form the concept of freedom period.

In an Allen Greenspan article titled gold and economic freedom he maintains that
  fractional reserve banking is a tool used by statists to implement socialism on the general public. He goes on to explain the Fed is a Ponzi scheme doomed to failure and boom bust cycles. In this article he attributes the cause of the depression to a speculative boom followed by a contraction in credit coupled with a monetary policy designed to transfer U.S. gold to Britain in order to artificialy support socialism in Britain so that British subjects would not lose their patience with dependence on British socialism and demand American style capitalism and wealth. What Allen Greenspan am I talking about? The very same Sir Allen Greenspan KBE (Knight commander of the order of the British empire) who was knighted by the Queen of England for his service to her while the chairman of the board under Reagan and what I consider to be the Bush/Clinton admin for far to many reasons to get into on the forum. I personally have always maintained that the chiarman of the Fed is the most powerful leader in the U.S. because although they may be an apointee of the President who really in my opinion has less Constituional power than the speaker of the house is the decision maker that controls our day to day real life living standards and the direction of the country, jobs, savings, inflation home-ownership is of much more real life signifigance that what bills the President signs or vetoes.

I try not to get to politcal but it's clear ms fraud is caused by refusal to enforce basic property rights, and due process. I further believe their is no Constitutional basis for private banks to have a state granted monopoly over our economy, assets, and monetary system and that these banks being allowed to use our money as theirs and dangerously leverage it is the cause of the vast majority of our nations problems including the basis for ms fraud.

I believe our nation is designed to be free market capital Representive Republic with the laws based on Christian principles, a secular democracy while having some common elements is in some ways the opposite of a Republic and doomed to fail and socialist democracy as we have doomed to fail even faster due to polarized conflicts and contradictory interests. Unless we restore the Constitution or better yet a hybrid of  loose confederation of sovereign states as we had prior to the Constitution combined with  the majority of the Constitution and the first ten amendments  with some debt, tax, and central government revisions.

BTW free market capital just plain means a checkbook dictatorship of the people over the government and corporations, not the other way around as many people now mistakenly believe. If the citizens fail to produce and/or maintian their checkbook dictatoship that is when it ceases to be free market capitalism which mean you are free to buy and market what you want and free to keep your own capital.


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