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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Nye Lavalle
2nd UPDATE: Carlyle Group Shores Up Listed Fund Holding RMBS

DOW JONES NEWSWIRES
August 21, 2007 10:29 a.m.
(This updates an article published at 1223 GMT with further details, analyst comment and updated figures on the fund size.)

By Margot Patrick
Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--Carlyle Capital Corp. Ltd. (CCC.AE) - a highly leveraged fund listed in Amsterdam by U.S. private equity firm Carlyle Group that invests in residential mortgage-backed securities - has been forced to borrow money from its parent to meet margin calls.

In a statement Tuesday, Carlyle Capital said Carlyle Group has extended a $100 million one-year loan to help it fund itself, and that it has already tapped the loan for $10 million.

The move underscores how sharp drops in the market value of asset-backed securities have raised financing costs for funds and institutions using these kinds of securities as collateral.

On Monday, KKR Financial Inc., a real estate affiliate of rival private equity firm Kohlberg Kravis Roberts & Co., said it will raise new shares to help fund itself after "unprecedented disruption" in the residential mortgage and global commercial-paper markets forced it to sell assets at a loss.

Carlyle Capital floated on Euronext Amsterdam in July with about $880 million, and said it would use borrowed money to leverage its portfolio of asset-backed securities by about 29 times. At June 30, it had exposure to roughly $22.7 billion in investment assets - or 26 times its equity.

The company's shares were trading Tuesday at $16, up 20 cents on the day and down 16% from their July 4 listing price of $19.

Carlyle Capital's portfolio consists mainly of triple-A-rated residential mortgage-backed securities from U.S. agency issuers Freddie Mac (FRE) and Fannie Mae (FNM). It also invests in debt from U.S. and European companies, and some structured credit vehicles.

Because mortgage-backed bonds from Freddie Mac and Fannie Mae carry an implicit guarantee against default from the U.S. government, Carlyle Capital was able to borrow against them many times over.

In its prospectus, it said it would leverage its agency mortgage-backed bonds by up to 37 times, and that it previously had used more than 51 times leverage on these securities to amplify its returns.

However, the market value of these bonds has been hit over the past few months as investors have reassessed their exposure to any type of credit risk, making it harder to borrow money against them.

Since the end of May, spreads on agency mortgage bonds to swaps or Treasuries have widened by about 50%, said Jim Vogel, executive vice president of fixed income research for FTN Financial Capital Markets in Memphis.

Carlyle Capital President and Chief Executive John Stomber in a statement said the fair value of these assets has declined, "due to diminished demand for these securities in the market."

He said the loan from Carlyle Group "enhances" its ability to meet margin calls and means it can take advantage of new opportunities.

According to its prospectus, Carlyle Capital funds the bulk of its assets through repurchase agreements with 10 banks including Bear Stearns Cos. (BSC) and Lehman Brothers (LEH). It also has a $2 billion loan and note facility, which is rated triple-A by Moody's Investors Service.

At its listing, the company said it would set aside a liquidity cushion of around 20%, or about $176 million, "to meet reasonably foreseeable margin calls."

Carlyle Capital said in the prospectus it had performed "extensive statistical testing, including testing during periods of significant financial market volatility and stress, to determine the level of this liquidity cushion."

The company had been scheduled to hold a call with analysts on Wednesday to run through its second-quarter results, which were issued July 27. Tuesday, it said the call is postponed by a week to Aug. 29.

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,

Again, what does this have to do with anything? Please connect the dots in a way an ordinary person can understand.

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"Because mortgage-backed bonds from Freddie Mac and Fannie Mae carry an implicit guarantee against default from the U.S. government, Carlyle Capital was able to borrow against them many times over.

In its prospectus, it said it would leverage its agency mortgage-backed bonds by up to 37 times, and that it previously had used more than 51 times leverage on these securities to amplify its returns."

That is crystal clear the servicers are stealing the homes and using the mortgage backed securities to finance high stakes gambling.

The GSE's are using money from the taxpayers to fund looting the economy and throwing honest law abiding citizens out of thier homes and leaving them in the streets to die so they can gamble with the money and have the taxpayers cover the losses.

What dots are not being connected?


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Nye Lavalle
Thanks Greg!!! I am tired of some of the posts here whining and complaining. If they can't understand, that's ok, we don;t expect everyone to get it. Many lawyers and politicians dont and have not gotten it. However, they should send questions to us rather than biatch and moan. They don't know how deep and how bad the situation is. Some of us know, we're only trying to educate the masses. Simple equation:

BORROWER/CONSUMER FRAUD [ie. servicing fraud] = INVESTOR FRAUD [ie. cooking the books ala Enron]

If you don;t get it, then that;s ok, but don't biatch and moan when others are tryng to help everyone!
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Nye Lavalle
Carlyle Rescues Mortgage Fund
Loan of $100 Million
To Meet Margin Calls;
Pitfalls in Diversifying
By RANDALL SMITH, HENNY SENDER and MARGOT PATRICK
August 22, 2007; Page C2
Another big buyout firm, Carlyle Group, has run into bond-market turmoil, putting up $100 million to meet margin calls on a European mortgage investment affiliate with $22.7 billion in assets.


Carlyle extended a one-year loan at 10% interest to help Carlyle Capital Corp., based in Guernsey, off the coast of France, meet lender demands for additional funds. Many Carlyle partners, including co-founders David Rubenstein, Daniel D'Aniello and William Conway, collectively own a minority stake in the mortgage fund.

In a statement, Carlyle Capital said that even though 95% of its assets are "AAA mortgage-backed securities with the implied guarantee of the U.S. government, the fair value of these assets has declined due to diminished demand for these securities in the marketplace."

So far, the Carlyle situation doesn't appear as serious as that reported last week by a specialty-finance affiliate of Carlyle rival Kohlberg Kravis Roberts & Co. The affiliate, KKR Financial Holdings LLC in San Francisco, has asked investors to delay repaying $5 billion in short-term debt and said it may lose as much as $290 million on sales of jumbo mortgages backing the debt. Monday, partners of KKR said they would invest as much as $100 million to bolster the finance unit's capital.

The Carlyle fund, which went public last month on the Euronext Amsterdam exchange, reported debts to Wall Street lenders of $16.1 billion as of March 31. Those debts, in the form of short-term loans known as repurchase agreements, include $3.6 billion owed to Lehman Brothers Holdings Inc. and $3 billion to UBS AG.

Such repurchase agreements require borrowers to put up extra cash on a regular basis if the value of the assets backing the loans declines. By shoring up the resources of a fund in which the buyout firm owns a stake, the Carlyle partners aim to forestall the need to sell securities at fire-sale prices.

The declining value of the mortgage investments underscores the pitfalls of the private-equity firms' bid to diversify away from their core expertise of corporate buyouts in order to become broader-based investment-management firms.

Now, firms such as KKR and Carlyle -- which have been among the most aggressive in emphasizing growth of their assets under management -- are facing questions about their reputation and managerial skill. That is one reason why the partners at these firms have stepped in so quickly to help support these affiliates.

Firms such as TPG, the former Texas Pacific Group, that have stayed closest to the original private-equity model -- stressing returns on investment rather than rapid growth of assets under management -- haven't faced that sort of harsh scrutiny.

The timing is bad for both firms. KKR was planning to begin meeting investors in connection with a planned public listing in early September. Carlyle also has been studying a public listing.

Many investors in Carlyle Capital were investors in Carlyle's private-equity funds. By putting the cash they had committed to Carlyle's private-equity funds in the listed fund at least temporarily, these investors hoped to earn higher returns than they could with most short-term investments. In addition, Carlyle partners themselves put up $71 million of the total $945 million that was raised first in a private placement and then in the public listing.

Carlyle has a history of helping its investors when things go wrong. When a Carlyle European Internet fund went south, the firm slashed fees, allowed investors to cancel some commitments and helped them sell their interests without any loss of their original capital. Now, though, with public affiliates, such support is much trickier to orchestrate.

Write to Randall Smith at randall.smith@wsj.com, Henny Sender at henny.sender@wsj.com and Margot Patrick at margot.patrick@dowjones.com
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Joe B
Nye and Greg-

     Thanks for all of the data; now a suggestion (not a complaint, but a suggestion)!

     Right now, all of the data around what you all know is spread through the board. It takes a great deal of time to try to piece the various puzzles together; after all there are a lot of moving parts! In short, you both know VERY VERY much. I have spent a good deal of time trying to get smarter from reading your detailed posts, and it has helped me a TON!

     In general, complex financial transactions are confusing, and well...complex! Most folks may not want to understand them, but some do. I think many of the questions are coming from people who truly WANT to understand the information, but are having a hard time "following the money." In other words, if you don't know why the Carlyle group post is relevant, it just means you haven't understood their role in the process. 

     Here's the suggestion...

     Would you consider putting together a investor fraud for dummies summary of what is happening? 'Folks, here how this all works and all of the moving parts come together, and why they want to steal your home. It starts with securitization, insurance, bundling, re-selling, leveraging, etc...' We can apply whatever specifics apply to our cases, but you can provide the blueprint in general terms.

     We can then "pin" the post and folks can refer to it whenever you post a specific case like the Carlyle groups shenanigans. i.e. to understand why Carlyle has been able to leverage their $$$ 51 times, see the post above describing Wall streets role, etc.

     Please don't take my thoughts as a complaint; I assure you it is nothing of the sort. I just think that you are both in a position to really help folks, and if you could find some time to summarize what you know, all of the other posts begin to have context...

     Thank you both for helping us understand the process.

JB

    
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Moose
greg collins wrote:
"Because mortgage-backed bonds from Freddie Mac and Fannie Mae carry an implicit guarantee against default from the U.S. government, Carlyle Capital was able to borrow against them many times over.

In its prospectus, it said it would leverage its agency mortgage-backed bonds by up to 37 times, and that it previously had used more than 51 times leverage on these securities to amplify its returns."

That is crystal clear the servicers are stealing the homes and using the mortgage backed securities to finance high stakes gambling.

The GSE's are using money from the taxpayers to fund looting the economy and throwing honest law abiding citizens out of thier homes and leaving them in the streets to die so they can gamble with the money and have the taxpayers cover the losses.

What dots are not being connected?




Guys, this is absurd.  Now you're making stuff up. I don't know what you get out of it but we need to deal with reality: 

The investors/bond markets are the ones taking the risk with their money. I've always said those markets are nothing more than legalized gambling. But it is legal and millions of people probably have some of their retirement money in funds that hold some of those securities or in other funds that do.  But whether they lose money or not has no affect on a current borrower. No matter how many times they move bonds around or close tranches of certificates or sell servicing rights the fact remains there's still a loan and someone is going to service it.  When a mortgage lender goes bankrupt or gets bought, or some hedge fund whines about what's happening to their investment, it has no affect on you unless you're an investor - and if you're rich enough to be involved in a hedge fund you're not facing being serviced by a predatory servicer.

That's the reality. 

The vast majority of predatory servicing (remember "mortgage servicing fraud?") takes place in the sub-prime markets that the GSE's are VERY minor players in. By definition, a sub-prime loan is "non-conforming" under Fannie/Freddie rules. Yes, they wanted to get further into it, but as yet, and especially under present circumstances, they aren't going to be allowed to venture further into securitizing sub-prime loans.

And the GSE's do not use taxpayer funds.

This diversion from the real problems people are facing is not only a waste of time but it also starts making anyone with a real problem look like a conspiracy kook.

It's like making weird stuff up will bring the tooth fairy in and sweep this vast, evil conspiracy into the dust bin. Sorry. Public opinion about Carlyle, Bush, the Federal Reserve, Fannie, Freddie, etc., etc., isn't going to keep one more person in their home when an Ocwen, SPS, Litton or EMC decides to come after them to create and then cure a default.

The "sky-is-falling" conspiracy/political crap would fit better on a forum where it would at least be relevant.

Moose







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Your making stuff up Moose and coming up with completely off the wall explanations to excuse these criminals. That was a direct quote from the Dows Jones article.  You think the Tax payers will not cover the loses of  GOVERNMENT SPONSORED ENTERPRISE.

You also think Ron Paul doesn't know what he's talking about when he was on the Congressional banking committee.

When the whole world is focused on these criminals financial crimes why are you so obsessed with getting them off the hook.

It's not legal to steal homes to use the Mortgage backed securities to play hedge funds with. It's not legal to throw MBS pools into foreclosure to get the payout on the derivatives contracts.

When people go to court and they present all the facts of the case in proper fashion and the judge won't even listen to them because they are throwing the cases people need to know what they are up against.

Your misleading people by leading them to believe they can defeat the entire financial services industry and the corrupt politicians who support them just by doing a good job presenting their case of just by getting a good lawyer.

It's a great idea to learn as much about Ms fraud and get a good lawyer asap but if there were that many good consumer or fraud attorneys handling these cases we would have won many more cases by now.

I don't mean to be argumentative but why would be trying to discredit forum members, financial experts, banking members etc. when they make it clear that the financial markets are in great danger due to sub-prime and the lenders/servicers got us into this mess due to fraud and dangerous leverage of MBS backed investments. How is it that you know so much more than Warren Buffet, Allen Greenspan, Ben Bernanke, Senate and Congressional banking committee members, and financial journalists, hedge fund managers etc. ?

An finally how can you say Bush is not involved in this when he took 12 million in unlawful donations from Roland Arnall who is the sole owner of a company which was found guilty of fraud by 49 states attorney general.

How is it Constitutional to thow out the votes of the Democrats in order to get a criminal who defrauded millions of U.S. citizens out of the country.
I worked with Senator Obama on that who is a Constitutional attorney. How is it that you know so much more than all these people where do you get your inside information from that even Fed chairman who run the whole economy, banking menbers and professional journalists are not priviledged to are you a Rothschild, Warburg or a Rockerfeller?

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Moose

greg collins wrote:
Your making stuff up Moose and coming up with completely off the wall explanations to excuse these criminals. That was a direct quote from the Dows Jones article.  You think the Tax payers will not cover the loses of  GOVERNMENT SPONSORED ENTERPRISE.

Greg, I don't make stuff up. Please show me how taxpayer funds are used by the GSE's and where there's anything more than an implied guarantee. There isn't one. The only thing that exists is a "feeling" that the government wouldn't let them melt down entirely. That doesn't mean investors would get anything more than a few pennies on their dollars IF congress took some new legislative action to enable it, let alone complete protection from something like the FDIC. You're making stuff up.

greg collins wrote:
You also think Ron Paul doesn't know what he's talking about when he was on the Congressional banking committee.


Greg, please show us where Paul's being on a congressional committee had anything to do with expertise. Paul is a lone outcast with no influence whatsoever because of his obscure and nonsensical views.  He's been relying on the anti-IRS/Fedral Reserve movement in Texas to keep him in office this long.  He'd never survive an electoral challenge outside his own unique district.

greg collins wrote:
When the whole world is focused on these criminals financial crimes why are you so obsessed with getting them off the hook.


You're like trying to take a drink of water out of a fire hose. The whole world is not focused on these criminals alleged "financial crimes." You're fixated on it as are a number of chicken-littles trying to make names for themselves and steer people away from reality. This is the same crowd that has been telling us a depression was imminent for the last thirty years or so, that 9-11 was a CIA plot, the 16th amendment wasn't actually ratified, the Illumiati has us marching to a new world order and men didn't actually land on the moon.

greg collins wrote:
It's not legal to steal homes to use the Mortgage backed securities to play hedge funds with. It's not legal to throw MBS pools into foreclosure to get the payout on the derivatives contracts.


You're confused. IT IS LEGAL to use RMBS to play in hedge funds.  It is not legal to steal homes but you're blending the parties together in a hopelessly convoluted and ridiculous melange that does nothing to point to the actual perpetrators of the wrongdoing.  Try to focus on the legal concept of "failure to state a claim for which relief can be granted." That is a very important factor in civil law. That's where your shotgun approach won't survive in litigation and why so many attorneys turn down cases.

greg collins wrote:
When people go to court and they present all the facts of the case in proper fashion and the judge won't even listen to them because they are throwing the cases people need to know what they are up against.


When you present the kind of nonsense you're ranting about, your credibility is destroyed in court. Yes, Judges can and will dump cases. It's easy. But consider that only about 99% ever get that far, which means Judges aren't getting the shot at "throwing" the vast majority of them.

greg collins wrote:
Your misleading people by leading them to believe they can defeat the entire financial services industry and the corrupt politicians who support them just by doing a good job presenting their case of just by getting a good lawyer.


More nonsense. They don't have to defeat any such a mythological industry. They have to defeat their opponents and you have to SPECIFICALLY identify them and the damages they caused.

You seem to advocate the losing proposition that because the guys over at Charlie company twenty miles away are dodging incomming enemy artillery that you should worry about their sorry butts as the waves of oncoming infantry are advancing on you.

greg collins wrote:
It's a great idea to learn as much about Ms fraud and get a good lawyer asap but if there were that many good consumer or fraud attorneys handling these cases we would have won many more cases by now.


Almost right. Learning about servicing fraud is important. What isn't important are all the other nonsensical theories that cannot have an impact on your case. When the enemy is within range of your rifle who gives a rat's patoot about the pilot of one of their supply aircraft back home?

greg collins wrote:
I don't mean to be argumentative but why would be trying to discredit forum members, financial experts, banking members etc. when they make it clear that the financial markets are in great danger due to sub-prime and the lenders/servicers got us into this mess due to fraud and dangerous leverage of MBS backed investments.


What any of that means I'm really not sure. The "great danger" in the financial markets comes and goes over time and most of the risk is faced by the investors. NOTHING going on there can have any affect on a typical sub-prime borrower who is facing a rate increase.

greg collins wrote:
 How is it that you know so much more than Warren Buffet, Allen Greenspan, Ben Bernanke, Senate and Congressional banking committee members, and financial journalists, hedge fund managers etc. ?


None of that makes any sense at all. Nor do any of them care about, let alone know much about, mortgage servicing fraud.

greg collins wrote:
An finally how can you say Bush is not involved in this when he took 12 million in unlawful donations from Roland Arnall who is the sole owner of a company which was found guilty of fraud by 49 states attorney general.


Please point out how the contributions were "unlawful."  You can't. These people aren't stupid enought to get hung up with that.

All the politicians are guilty. Arnall was a major Democratic supporter when he thought it would benefit him and his company.  They are equal-opportunity influencers. They put their money where they think it will do the most good no matter who is (or will be) in office.

greg collins wrote:
How is it Constitutional to thow out the votes of the Democrats in order to get a criminal who defrauded millions of U.S. citizens out of the country.


I'm not even going to try and get you to explain what that meant in terms of "constitutional" relevance.

greg collins wrote:
I worked with Senator Obama on that who is a Constitutional attorney.


Please point out what a "constitutional attorney" is. Obama is a Junior US Senator who is running for office and you're only demonstrating your motives here with the diatribe you keep harping on.

greg collins wrote:
How is it that you know so much more than all these people where do you get your inside information from that even Fed chairman who run the whole economy, banking menbers and professional journalists are not priviledged to are you a Rothschild, Warburg or a Rockerfeller?


More nonsensical ranting and raving. You're demonstrating precisely why progress in this matter isn't going to come from linking REAL problems to mythological conspiracy theories and political biggotry.

Moose



 

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