A federal judge on Monday made the rare move to stop the foreclosure auction of an Aurora woman's house in a case that squarely takes on the constitutionality of Colorado's foreclosure laws.
U.S. District Judge William Martinez issued a preliminary injunction against the sale of Lisa Kay Brumfiel's four-bedroom home, scheduled for Wednesday in Arapahoe County, until the judge can decide whether parts of state law are unfair to homeowners facing the loss of their house.
"Unfair" isn't quite the word.
Colorado, for those who haven't followed either the news or The Ticker, passed a nice law to "solve" the foreclosure problem for banks -- they stripped the requirement that the banks actually have the mortgage documents to prove that they were the proper party to be able to foreclose.
Remember that the big issue a couple of years ago was "robosigning" -- that is, document forgery. Continuing the scam is, of course, the highest and best use of "lobbying" lawmakers, and in Colorado the banksters scored big, removing even the pretense that a foreclosing actor actually owned the mortgage through documentation -- even forged documentation!
Now a simple statement became enough.
So-called "financial news media" has ignored this, of course. It's in their "best interest" too; after all, you wouldn't be able to sell ads on a TeeVee station talking about "together we'll go far" if the people understood that how the stagecoach "went far" was by stealing all your property.
I thought I was disgusted in the 1990s when I saw company after company issue fanciful S-1s collectively claiming the GDP of the world a few dozen times over. That was indeed quite the scam, and when it came apart everyone who believed in it lost all or most of their money. Nobody was held accountable for that in the media either; witness Cramer. He got a TV show out of it. What did you get out of his list if you bought into it just weeks before it all blew up? That's simple: Bankruptcy.
But these guys were and are chumps. After all, we're just talking billions there. No, the big enchilada is taking homes, the biggest asset that most Americans have, slicing and dicing that while turning it into "financial products" that the banksters can then skim off their "piece" of, taking what should be a durable consumer good and transforming it into the greatest heist of all time.
Nobody has put a stop to it, despite clear proof via admission that not only were thousands upon thousands of perjured documents filed with courts but in addition to that there is an email and other document trail that the banks knew they were screwing people as their own staff were calling these securities by such lovely and value-descriptive titles as "vomit" and "trash."
Our local, state and federal governments have all been involved in what amounts to an organized looting operation. As people have challenged the schemes the response has been for the banksters to go to the governments and get passed even more laws making legal what would otherwise be a raw abuse of process and even outright theft.
Now there may be one tiny bit of honest judicial intervention -- in Colorado.
This problem is not about, at its core, whether someone paid their mortgage or not. It is about whether a financial institution can take a debt instrument and pass it around in name only as the "footer" of a monstrous labyrinth of bogus securities and schemes from which they skim fees and costs while damning the ordinary people to bear those costs whether they are actually the proper party or not.
At its core this is about abuse of leverage and manufacturing a retroactive paper trail after the fact to cover up what were a host of improper and, perhaps, criminal activity beforehand. It is a rank violation of the IRS code, not to mention Trust Law where these "securities" are bundled and packaged, to fail to transfer into the trusts these loans in a timely manner. The tax implications alone run into the hundreds of billions of dollars and a huge part of why such "laws" were pushed and passed appears to be focused on preventing a meritorious defense from reaching into that cesspool and forcing out into the open the fact that these instruments do not in fact really exist as the requirements in the law to create them were not followed.
Now, finally, literal years after I and others started raising hell about this, there is one judge who has called "Bee Ess!" on this entire house of cards. Perhaps -- just perhaps -- Colorado's "law" will be ruled an unconstitutional piece of trash intended to steal homes from citizens at literal gunpoint.
When courtrooms are used to take property without the moving party having to produce the actual documentation proving their standing what has happened is that the party filing suit has managed, through legislative fiat, to obtain the guns and personnel of government as their own "private army" which they are then abusing to commit an act that is in form, substance and function virtually indistinguishable from old-fashioned armed robbery.
We are well past the point where the judiciary should have put a stop to this crap.
Here's hoping that Judge Martinez does so.
Wow, you're so on-the-ball that it only took you five years to start raising hell beyond when multiple people, myself included, began to howl about exactly this point?
Investors in mortgage-backed securities, built on the shoulders of the tax-advantaged Real Estate Mortgage Investment Conduit (“REMIC”), may be facing extraordinary tax losses because of how bankers and lawyers structured these securities. This calamity is compounded by the fact that those professional advisers should have known that the REMICs they created were flawed from the start. If these losses are realized, those professionals will face suits for damages so large that they could put them out of business. That is, unless the Wall Street Rule is applied.
From 2010-10-03 on The Ticker, which re-hashed a theme I've been pounding on since 2007:
See, there's this little problem. A REMIC (Real Estate Mortgage Investment Conduit, or "MBS") is a special thing under IRS rules. Normally a business would have to operate at a profit or loss, pay taxes, and then pay dividends. This results in double-taxation.
A REMIC has a special status under the IRS code which avoids this; the interest flows through to the investor without being separately taxed at the business-level of the REMIC itself.
But in exchange for this, there are constraints. One of them is that a REMIC cannot acquire "distressed" assets - that is, notes that have defaulted. It cannot, in other words, engage (intentionally, up front) in what would be considered "recovery operations" if you will.
The reason for this is that if it could, every "distressed asset" acquirer would set up such a structure and avoid monstrous amounts of tax. So, as to avoid this problem, a REMIC can acquire only loans that are current.
And of course if there are no notes that are transferred this explains many things.
Like robosigned documents.
Like "lost document" affidavits (it explains notes being intentionally lost, since they can't be transferred to their correct place late, as the time window has long expired to meet legal requirements.)
Like allonges that magically appear on a document years later (and which are barred under the UCC because otherwise fraud becomes trivial to commit.)
Because REMICs did not file the correct returns and may have committed fraud, the statute of limitations for earlier years will remain open indefinitely, giving the IRS adequate time to pursue REMIC litigation after it obtains the information it needs.If the IRS does not take action at the appropriate time, however, it will be a serious failure and will result in the loss of billions of dollars of tax revenue for the federal government.
More troubling still is the IRS’s failure to address the wide-scale abuse and problems that existed during the years leading up to the financial meltdown. The IRS’s failure to adequately police REMICs is one more reason that the mortgage industry was able to overly inflate the housing market. And that, inexorably, led to the crash and our tepid recovery from it.
More generally, by overlooking the serious defects in the transactions, courts and governmental agencies encourage the type of behavior that led to the financial crisis. Lawmakers, law enforcement agencies and the judiciary cede their governing functions to private industry if they allow players to disregard the law and stride to create law through their own practices.
And until We The People demand through political process that this crap stop and if necessary form a new political party to do so, trampling the existing parties who refuse, you will continue to get screwed and both you and your children will be serially robbed and financially abused by these latter-day robber barons.
Attorney General Chris Koster today announced that the state of Missouri and Lorraine Brown, former President of DocX, LLC, have reached a plea agreement. Under the agreement, Ms. Brown will plead guilty to one felony count of forgery, one felony count of perjury, and one misdemeanor count of making a false declaration.
Brown will be sentenced to a term of imprisonment of not less than two years and not to exceed three years in the Missouri Department of Corrections.
Ms. Brown is the former President of the company DocX, LLC. During the period of March to October 2009, DocX, at the direction of Brown, instituted a surrogate signing policy whereby employees signed, not their name, but the names of other employees on thousands of mortgage documents that were notarized and filed across the country. Prior to 2009, similar signing practices were also employed at DocX. Brown concealed these practices from her clients, the national mortgage servicers, and the parent company of DocX. The practices of DocX were brought to national attention by a “60 Minutes” report and resulted in several major lenders temporarily suspending foreclosures in 2010.
And that's not all! It be Federal too....
The guilty plea of Lorraine Brown, 56, of Alpharetta, Ga., was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Middle District of Florida Robert E. O’Neill; and Michael Steinbach, Special Agent in Charge of the FBI’s Jacksonville Field Office.
The plea, to conspiracy to commit mail and wire fraud, was entered before U.S. Magistrate Judge Monte C. Richardson in Jacksonville federal court. Brown faces a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the crime. The date for sentencing has not yet been set.
“Lorraine Brown participated in a scheme to fabricate mortgage-related documents at the height of the financial crisis,” said Assistant Attorney General Breuer. “She was responsible for more than a million fraudulent documents entering the system, directing company employees to forge and falsify documents relied on by property recorders, title insurers and others. Appropriately, she now faces the prospect of prison time.”
Ah, look what showed up...
So now about all those destroyed chains of title and alleged "mortgage trusts" that actually have no mortgages in them....
What is really interesting is that the legal complaint filed by Schneiderman talks about sloppy procedures for loan selection, but still does not get to the real fun, namely multiple pledges of loans for different RMBS. And you can be sure that Schneiderman does not really want to go that far because it might force him to ask the same question about the other, far larger issuers of RMBS.
Remember, the whole point of the Robo-signing settlement is not consumer protection, but rather fraud. The key question: Who’s got the note? If you don’t have to deliver the note into an RMBS trust, then the door is wide open for securities fraud.
What's being talked about here is the NY lawsuit against JPM (really Bear Stearns, but now JPM since they bought it) for securities fraud.
I have long maintained (since this crap begain to become public in 2007 and 2008) that the 900lb Gorilla in the room was going to come about when someone managed to bring the following argument before a Judge in a foreclosure action:
Your Honor, defendant moves that the plaintiff be required to show a full and complete accounting of all activity of the subject claimed note, including but not limited to:
The intent here is quite simple -- not only is there a judicial interest in guaranteeing that the person who is standing before the judge is really the assignee of the note (or his lawful agent) and there is only one of them out there (who is the one standing before the bar) in addition you can only collect on a loss via lawsuit or other payment once!
If you get into a car accident and your auto insurance pays your $20,000 in damage you cannot then sue the person who hit you, as you were made whole and you can only collect once. In point of fact the insurance company will almost-certainly force you to sign over your right to sue to them before they pay you, but if they don't you still can't sue the person who hit you as you have no economic harm as you were already paid!
Recovery by lawsuit, including foreclosure, requires economic harm. If there was no economic harm there is no foul and your judgment, which you may well be entitled to, is for $0.00. Further, if the person who actually suffered the harm isn't the one in court he can't recover anything because the wrong person is suing and only a real party at interest with economic harm can sue.
So if the bondholder was made whole via a credit default swap or any other act, including rescission, his claim on you is extinguished. The person who sold him the swap may have a legal claim via lawsuit or the person who was forced to buy back the bogus loan may have a right of recovery but he cannot foreclose unless he obtained possession of the defaulted instrument through that process of payment and if he does then he had better be the person standing in the courtroom before the judge.
This is really basic stuff here folks -- you don't get sue because you're "butt-hurt" by someone's acts; you can only sue to recover actual economic injury, whether your requested remedy is foreclosure or simple money damages.
Chris is onto this but this rabbit hole goes a lot further than many people think it does.
If -- and this is a big if -- we can get just one honest judge to hear these arguments and force that accounting to take place in his courtroom then the game is up.
This is an interesting analysis of securitization transactions, concluding that the process is inherently illegal on a number of levels -- including usury, tax evasion and common-law fraud.
It makes for fascinating reading, but of course in today's world where regulators and law enforcement is bribed with campaign donations, whether anyone will look at the issue at this level from an analytical point of view is rather unlikely....
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