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.
Articles |The FORUM |Law Library |Videos | Fraudsters & Co. |File Complaints |How they STEAL |Search MSFraud |Contact Us
I found this San Franscico Chronicle opinion piece to be interesting and thought it meritworthy to share with this forum:

San Francisco Chronicle

Interest rate 'freeze' - the real story is fraud

Bankers pay lip service to families while scurrying to avert suits, prison

New proposals to ease our great mortgage meltdown keep rolling in. First the Treasury Department urged the creation of a new fund that would buy risky mortgage bonds as a tactic to hide what those bonds were really worth. (Not much.) Then the idea was to use Fannie Mae and Freddie Mac to buy the risky loans, even if it was clear that U.S. taxpayers would eventually be stuck with the bill. But that plan went south after Fannie suffered a new accounting scandal, and Freddie's existing loan losses shot up more than expected.

Now, just unveiled Thursday, comes the "freeze," the brainchild of Treasury Secretary Henry Paulson. It sounds good: For five years, mortgage lenders will freeze interest rates on a limited number of "teaser" subprime loans. Other homeowners facing foreclosure will be offered assistance from the Federal Housing Administration.

But unfortunately, the "freeze" is just another fraud - and like the other bailout proposals, it has nothing to do with U.S. house prices, with "working families," keeping people in their homes or any of that nonsense.

The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.

The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

And, to be sure, fraud is everywhere. It's in the loan application documents, and it's in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies - all the way up to senior management - knew about it.

I can hear the hum of shredders working overtime, and maybe that is the new "hot" industry to invest in. There are lots of people who would like to muzzle subpoena-happy New York Attorney General Andrew Cuomo to buy time and make this all go away. Cuomo is just inches from getting what he needs to start putting a lot of people in prison. I bet some people are trying right now to make him an offer "he can't refuse."

Despite Thursday's ballyhooed new deal with mortgage lenders, does anyone really think that it can ultimately stop fraud lawsuits by mortgage bond investors, many of them spread out across the globe?

The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC.

The problem isn't just subprime loans. It is the entire mortgage market. As home prices fall, defaults will rise sharply - period. And so will the patience of mortgage bondholders. Different classes of mortgage bonds from various risk pools are owned by different central banks, funds, pensions and investors all over the world. Even your pension or 401(k) might have some of these bonds in it.

Perhaps some U.S. government department can make veiled threats to foreign countries to suggest they will suffer unpleasant consequences if their largest holders (central banks and investment funds) don't go along with the plan, but how could it be possible to strong-arm everyone?

What would be prudent and logical is for the banks that sold this toxic waste to buy it back and for a lot of people to go to prison. If they knew about the fraud, they should have to buy the bonds back. The time to look into this is before the shredders have worked their magic - not five years from now.

Those selling the "freeze" have suggested that mortgage-backed securities investors will benefit because they lose more with rising foreclosures. But with fast-depreciating collateral, the last thing investors in mortgage bonds ought to do is put off foreclosures. Rate freezes are at best a tool for delaying the inevitable foreclosures when even the most optimistic forecasters expect home prices to fall. In October, Goldman Sachs issued a report forecasting an incredible 35 to 40 percent drop in California home prices in the coming few years. To minimize losses, a mortgage bondholder would obviously be better off foreclosing on a home before prices plunge.

The goal of the freeze may be to delay bond investors from suing by putting off the big foreclosure wave for several years. But it may also be to stop bond investors from suing. If the investors agreed to loan modifications with the "real" wage and asset information from refinancing borrowers, mortgage originators and bundlers would have an excuse once the foreclosure occurred. They could say, "Fraud? What fraud?! You knew the borrower's real income and asset information later when he refinanced!"

The key is to refinance borrowers whose current loans involved fraud in the origination process. And I assure you it was a minority of borrowers whose loans didn't involve fraud.

The government is trying to accomplish wide-scale refinancing by tricking bond investors, or by tricking U.S. taxpayers. Guess who will foot the bill now that the FHA is entering the fray?

Ultimately, the people in these secret Paulson meetings were probably less worried about saving the mortgage market than with saving themselves. Some might be looking at prison time.

As chief of Goldman Sachs, Paulson was involved, to degrees as yet unrevealed, in the mortgage securitization process during the halcyon days of mortgage fraud from 2004 to 2006.

Paulson became the U.S. Treasury secretary on July 10, 2006, after the extent of the debacle was coming into focus for those in the know. Goldman Sachs achieved recent accolades in the markets for having bet heavily against the housing market, while Citigroup, Morgan Stanley, Bear Sterns, Merrill Lynch and others got hammered for failing to time the end of the credit bubble.

Goldman Sachs is the only major investment bank in the United States that has emerged as yet unscathed from this debacle. The success of its strategy must have resulted from fairly substantial bets against housing, mortgage banking and related industries, which also means that Goldman Sachs saw this coming at the same time they were bundling and selling these loans.

If a mortgage bond investor sues Goldman Sachs to force the institution to buy back loans, could Paulson be forced to testify as to whether Goldman Sachs knew or had reason to know about fraud in the origination process of the loans it was bundling?

It is truly amazing that right now everyone in the country is deferring to Paulson and the heads of Countrywide, JPMorgan, Bank of America and others as the best group to work out a solution to this problem. No one is talking about the fact that these people created the problem and profited to the tune of hundreds of billions of dollars from it.

I suspect that such a group first sat down and tried to figure out how to protect their financial interests and avoid criminal liability. And then when they agreed on the plan, they decided to sell it as "helping working families stay in their homes." That's why these meetings were secret, and reporters and the public weren't invited.

The next time that Paulson is before the Senate Finance Committee, instead of asking, "How much money do you think we should give your banking buddies?" I'd like to see New York Sen. Chuck Schumer ask him what he knew about this staggering fraud at the time he was chief of Goldman Sachs.

The Goldman report in October suggests that rampant investor demand is to blame for origination fraud - even though these investors were misled by high credit ratings from bond rating agencies being paid billions by the U.S. investment banks, like Goldman, that were selling the bundled mortgages.

This logic is like saying shoppers seeking bargain-priced soup encourage the grocery store owner to steal it. I mean, we're talking about criminal fraud here. We are on the cusp of a mammoth financial crisis, and the Federal Reserve and the U.S. Treasury are trying to limit the liability of their banking friends under the guise of trying to help borrowers. At stake is nothing short of the continued existence of the U.S. banking system.

Sean Olender is a San Mateo attorney. Contact us at

This article appeared on page C - 1 of the San Francisco Chronicle
Quote 0 0
Ed Cage


"The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth."


"What would be prudent and logical is for the banks that sold this toxic waste to buy it back and for a lot of people to go to prison. If they knew about the fraud, they should have to buy the bonds back. The time to look into this is before the shredders have worked their magic - not five years from now."




This is a great article and yet another *great* post!  I urge everyone in here to read the above article just posted by WAR. Your unselfish contributions to this forum have not gone unappreciated Bill.


Ed Cage

Quote 0 0
Joe B

     I read the article earlier today, and one of the issues that I found curious is the point about the servicers restructuring the loans that have fraud in the process or documents. By accepting the restructuring or "freeze," they will likely be forever burying the opportunity for the homeowner to exercise their rights to pursue action for any fraud up to that point; regardless of the magnitude of that fraud.

     In other words, I have no doubt that the servicers are busy looking over loan documents and identifying the ones with significant liability buried in them, and putting them at the head of the line for restructuring!

     What I would like to see is for someone who gets an offer to restructure to post the actual agreement. I strongly suspect, and a few of us have addressed this issue in earlier posts, that the homeowner will have to sign a release and non-disclosure in order to "benefit" from this restructuring. The "get out of jail free card" will forever benefit the servicer, the trust, all parties to the loan, and the investors.

     So, please, if anyone gets an offer, please post the details here for us to look at. I am sure many of us would benefit from looking over the document. Don't violate any non-disclosure agreement, but if you post before you sign, you would not be violating this agreement.

Just my $.02

Quote 0 0
Out InThe Cold - Mortgage rate freeze leaves many in the cold

Quote 0 0

*WARNING*  The comments left by most reader's of this Pioneer Press article are very demeaning to those of us losing our homes.   One in particular stated that the mortgage meltdown is simply "survival of the smartest, demise of the dumbest"  I wandered into the comments section to inform people of MS fraud and wound up sitting there crying silently over what everyone was saying.  I managed to offer a reply and mention MS fraud and this site - but not without being deeply upset.  So I wanted to warn the rest of you if you plan to read and/or comment on this article.
Quote 0 0
Ed Cage

Dear April:

Your post moved me with compassion and understanding more than any I have read in MSF.  Indeed President Bush's bill is far too narrow in scope in that it offers hope for only a small fraction of those who have been illegally taken advantage of.


Although I'm a lifetime GOPer and actually sent $200 to GW Bush's campaign, I believe it is primarily a cosmetic piece of legislation designed by his subordinates to make it appear as though the sub-prime melt down is being addressed by the Administration.   



This flawed "remedy" fails to address the fact that mortgage servicers skillfully and artificially generate unsubstantiated temporary "defaults."  This is achieved by dozens of stealth methods buried within secretive "escrow" and "suspense" accounts. Inflated and overly frequent drive by "inspections," intentionally holding valid payments, misapplying regular payments to bogus charges contained within these dubious "suspense" accounts instead of applying them to P&I, generates artificial late charges and unjustified temporary “defaults” resulting in DISQUALIFING already exploited victims. Bush's bill overlooks this!



Frankly as a former Republican State Delegate, I’m embarrassed by this. Although I support President Bush and will still vote Republican in 2008, clearly this revolting and highly misleading bill was not Bush's finest hour.


April I genuinely feel your pain and frustration over this grossly inadequate piece of legislation..

Ed Cage
Plano Texas

Quote 0 0
Thank you, Ed.  And thank you to everyone else that continues to offer words of does make me feel better.

Well, I contacted the reporter for the Pioneer Press story today, as well as Max Gardner's office.  Mr. Gardner is an attorney from NC that is training other BK attornies throughout the country on servicing fraud and abuse.  His office refered me to an attorney right here in MN.  Will wait for a call back.

After spending some time on the phone with the reporter, I emailed her many other pieces of info. and links, like this site and the Katherine Porter paper, along with some Litton gems off of  This story is gaining ground in mainstream media, I think now is the time to go full force to the media.  Anyone who has not yet gone public with your stories, I say the time is now!
Quote 0 0
Write a reply...