It seems like a million years ago that I first advanced the theory that the wholesale separation of mortgage deeds (the lien against your land) from the promissory notes (the evidence of the debt) by depositing most of this country’s mortgage deeds into MERS (Mortgage Electronic Registration Systems) might mean that most mortgages had thusly been converted into unsecured debt. That means you still owe the money, but they can’t foreclose against your house. I called it Mortgage Fractionalization. It wasn’t a million years ago, it was 2009 and I was waaaay out there on a limb with that legal analysis. This means that the offering documents for the securities based on these mortgages are riddled with material misstatements, since they were supposed to be bundled secured debt, not unsecured debt.
Since then, I have read I don’t know how many Pooling and Servicing Agreements and found that the banks appear to have routinely not followed the rules set down in the PSAs. This means that the mortgages that were supposed to have been bundled into these securities might not have even been deposited in them, or that the same mortgage may have been deposited into more than one security. Some of those trustees may be holding a whole lot of nothing in those trusts. The law does not favor giving one creditor rights that are superior to another and has strict rules that a creditor must follow to create and maintain its rights against specific collateral. Massacio did a great explanation of these strict requirements which are contained in the Uniform Commercial Code. LINK and LINK
Understand this, if the banks do not have a lien against collateral for all this mortgage lending AND they never properly transferred the debt into the RMBS (Residential Mortgage-Backed Security) trusts, then the buyers of those securities can force the banks to buy back the debt, debt that homeowners could discharge in bankruptcy, and the banks will have to take a write downs in the trillions of dollars. As BMAZ pointed out, this would be a much bigger banking crisis than in 2007-2008. Further, the RMBS problem is magnified geometrically, because there are derivatives that are pegged to these RMBS. That means the derivatives are also worthless, as the Salvation Army just found out.
So, Tim Geithner threw the banks a lifeline with HAMP and HARP, or as Marcy likes to call them, extend and pretend. By accepting a mortgage modification, the homeowners would sign a new set of mortgage documents, recreating the extinguished security interest on their property and giving the bank with which they were dealing a new lien on their house. I hope to heaven that people who have done these mods turn out to have been dealing with the correct bank. Actually they may have, because the best success rate for mortgage modifications were with banks that originated the loan and then kept it, so everybody knew who owned the loan. But the banks were too stupid or incompetent to seize this opportunity to lure homeowners back into land peonage.
Instead, they went on a rampage of forgery founding document mills to create and backdate phony documents which purported to evidence transfers and assignments of mortgages that just never happened.
I worried that the banks would succeed in spinning this, that DOJ would just not prosecute, that the state Attorney Generals would get punked in their investigation and negotiation, that the Mainstream media would tell the story the wrong way and judges would go back to the bad old days when they just accepted any bullshit a bank’s lawyer represented without proof as gospel. An army of individual homeowners challenged the banks in court and started winning.
So, we at FDL kept plugging away at this story, as did others like Yves Smith and a real trench warrior, Lynn Syzmonic. Over and over, we batted back the lies, the spin. The commentors contributed every bit as much as the front pagers and, lord knows, kept me going on this story. This was a real community effort. We assembled our research and work on a single foreclosure fraud page, so that any judge, homeowner or journalist looking for link supported analysis could enjoy one stop shopping.
Last night, I think we hit a tipping point. 60 Minutes told the story, and they pretty much got it right. By the time a story gets to 60 Minutes, it’s become conventional wisdom. We did it guys.



44 Comments




“We did it guys.”
We did it with the help of some really smart people like Cynthia Kouril.
Very big congratulations! But did we win — us homeowners?
Asking in the sense of Neal Katyal and Salim Ahmed Hamdan.
Hi Cynthia, Didn’t Chapparal just file a diary here saying that the 60 minutes program was a cover-up? here: http://my.firedoglake.com/chaparral/2011/04/04/60-minutes-report-on-mortgage-fraud-crisis-is-coverup-of-real-issues/
I have to wonder what that 60 Minutes story would have been like if Don Hewitt was still Exec Prod of 60 Minutes.
As 60 Minutes exposes go, I gather it was pretty weak tea.
Thanks for all your hard work but I’m wondering if providing fake fraudulent documents to a court is criminal? If so, who can be held responsible? Who knew or should have known that “Linda Green” wasn’t a bank VP? I’m not a lawyer but I watched Law & Order for 17 yrs. It seems to me that the worst outcome is a negotiated settlement w/o criminal charges.
Thanks Cynthia,
yeah, it’s a mighty big corner to have turned. Back in 2008, all the media was talking about was deadbeat borrowers, end of story.
But the mess is still out there and the institutions which created it have yet to find their wallets. We have claimed some nice high ground but the war goes on.
Good going, Cynthia. Of course, reality isn’t going to make a dent in the firm belief of teabaggage that the Dems made lots of poor folks buy homes and that’s why the economy of the world tanked.
thank you, thank you. I only knew my end of the world when this nightmare started for me back in 2003. And I don’t know if I have done the right thing to hang onto my house or not. I am still in it, but they still have a bogus balance on my house. I have not sued them for the balance yet. I have been waiting for as much info as possible to come out and waiting for them to force me to that point.
I have not missed a payment now in over 5 years, paid back all they said I owed as I took out of chapter 13 bankruptcy. They have added 8000.00$ in fees while I was in bankruptcy despite my paying to them directly (never missing a payment) and then through the courts. All is safely documented and I have saved statements that changed my account number at least once. It’s GMAC (now ally) and I actually paid more than my payment for several years. I don’t know what the outcome will be, but because I live in Nebraska, where republicans run the state, I have feared pushing a legal outcome until there was enough info out there. I am very alone in this battle here in Nebraska.
Your diaries have validated our struggle, helped me stay sane, helped me see what I knew was the truth. The stress of dealing with this thing has been unbelievable. I had a conventional loan before this loan in a previous marriage, and had I not had that experience would not have known that the bank behavior was criminal. I feel for the thousands of first time buyers, elderly and african american and minority (as I female head of household, I fit this category) buyers who might not have known that this stuff was illegal, who might have swallowed the shame they threw at us as they took our houses.
This whole chapter in American history is a harbinger. I knew as I was going through it, that not only was I losing my house, I was losing my country. But this is something that the poor and the minorities already knew. I have thus far hung onto my house, as the truth comes to surface I can only pray that we find a way to hang on to this country, that was supposed to be, of the people, by the people and for the people.
That post refers to issues at the other end of the chain. The RMBS fraud. The 60 minutes piece did not cover that up, it didn’t cover it at all.
And you know what? I don’t care so much at this point in time. Here’s why: the RMBS raud was committted by big banks against other big banks, big pension funds, big hedge funds; in other words against sophisticated deep pockets entitites who can and will hire the very best legal and foresnsic accounting talent to protect their interests.
It’s already happening and those investors who were defrauded are making good progress in court. They don’t need our help.
Homeowners who are struggling to pay their bills and can’t afford a lawyer, DO need our help.
If 60 minutes had to pick which part of this problem to package into one story, I’m glad they picked the part about the homeowners.
My greatest fear was that the banksters would win the PR war and the truth would never get out.
A whole bunch of cnservative judges and law makers who would never read FDl or Naked Capitalism or even Krugman, just got told from a source they trust that
1) splitting the promissory note from the mortgage deed destroyed the lien on the land and banks have lost the right to seize the house,
2) that they lost or shredded the paper work,
3) that they are forging replacement paperwork,
4) that they may not even have standing to try to collect on the debt,
5) this has created a second systemic banking crisis (actually it’s the same systemic banking crisis as the first time, except know everybody knows the details and the we have caught up to the can that Hank Paulson kicked down the road with TARP)
And a whole bunch of homeowners who would never read us, just found that out, too. And now the MSM has recieved a memo about how this story is to be reported in future.
I would call that pretty darn good. It ain’t over yet, by a long shot, but it’s significant progress.
Forged documents used to prove hundreds of court cases is you idea of weak tea?
Damn, you must like your brew strong enough to strip paint.
Hell yeah, it’s criminal. And whoever set up the robo signing system should be in the dock.
Also, as some judges in Fla are proving by dragging in the managing partners of some foreclosure mills, the lawyers knew or were required to find out. So they have some liability.
The chief judge in NYS issued an order that all foreclsing plaintiff’s lawyers had to put in an affidavit attesting to their won review of the file and the accuracy of the paperwork or the case cannot move forward.
A whole bunch of cases in NY stopped dead in their tracks when he did that b/c lawyers don’t want to risk disbarment or prosecution and they know their paperwork is bogus.
The worst outcome is often a negotiated settlement w/o criminal charges, yet that seems to be what the US Attorney’s and state Ag’s around this country have their hearts set on. Local DA’s are just as able to go after perjury cases based on false affidavits, as any other tier of law enforcement. And the first prosecutor to go after this in a large way—is going to have a fabulous political career after that. S/He will be a hero to millions.
Yes the war goes on, but we have beat back their biggest weapon. Phony PR.
The 60 Minutes audience is not a bunch of DFH bloggers. It’s americans who live in flyover country. People we could never reach. And coming from a source they trust like 60 minutes, it’s received wisdom.
I think it’s could make a huge difference with people and in places where we would never make a dent.
You keep at it, the tide is turning. You keep all those cancelled checks and receipts and statements.
And now that the myth of the deadbeat homeowner and the myth of the stretegic defaulter has bitten the dust, and the truth of the forged docuemtns is has come out, even GOP judges are gonna get mad.
Just b/c someone is a republican does not mean they won’t do justice when the path is made clear to them. A nice clear map was laid out on the tv sets of a whole bunch of non-leberals Sunday night.
As to cancelled checks…I thought that this move was interesting. Back in 2004, they began destroying my checks and putting them through my account electronically. They would charge 10$ for every check each month. This meant that no cancelled check would be returned to me. I think this might have been to destroy the date of the check. Then they would put my checks through, late, so they could add a late fee. Then they could control when the checks were “dated” so to speak. Plus they could charge a fee. (I say that, knowing full well that this should not have been legal).
Exactly. Once it hits 60 Minutes, it’s part of the conventional wisdom, as you’ve said. The fact that you helped force the corporate media in this country to accept this is amazing.
Thanks. That explains the difference in judgment very well for me. Chaparral’s seemed a bit off in tone to me anyway.
Cynthia, Do you know any DAs ambitious enough to want to chance goig up against the banks?
Cynthia, YES WE DID!
I’m so proud of FDL and everyone here. I have to say that we got a letter last week that our mortgage has been sold to JP Morgan/Chase. I’ll be going to the courthouse this week to review my Deed of Trust and see if it has been detached from the recorded property Deed.
I hope they realize that I have never signed a contract with them and if they have separated the Deed of Trust/Mortgage Agreement from the Property Deed, then they got NOTHING!
Hope so. I’ve seen a lot of comment from the right that indicates they don’t believe that ‘librul media’ their panderers invented.
Let’s see this through to the ultimate conclusion: stripping these criminals of their positions and ill-gotten booty and make banking a very, very boring utility with little profit margin.
Cynthia–
You’ve done good! You are making a real difference in people’s lives, which is something bloggers don’t often do. These posts are an amazing public service!
Thanks.
Not to take away from the earned compliment, but ‘something bloggers don’t often do’ indicates you aren’t aware of the great difference bloggers make to those out in flyover land, who are greatly helped by a community of progressives they can hang with – if only in cyberspace.
Congratulations and thanks to you and Yves and Lynn, Cynthia! Fine and exceptionally worthy work. We will all hope that it all isn’t settled for peanuts, and that State AGs get religion. Yves has not been hopeful about that end, but this is great.
All of the cites were Lyndon LaRouche. It put me off a bit.
There’s still an atmosphere in the air that this is a big stumbling block to an ultimate goal of processing the foreclosures so we can get on with moving the economy forward. I will consider it a real win when they realize that these foreclosures aren’t theirs to process. They are still operating in finite Ponzi mode, where the point of the government and the courts is to bail them out on their indiscretions. They don’t see that they ever ever ever are the ones to swallow a loss.
I wonder if you can get your own bank to give you the microfiche of the checks? There has to be a scan of the check in some form.
The date written on a check is meaningless, you could backdate the check yourself, or write it out and forget to mail it, so all creditors “control” the date on your check.
I canceled a credit card once b/c I got a dunning phone call saying I had not paid my bill, it happened right after i got my canceled checks and bank statement. I said “I KNOW I paid the bill b/c i am looking at the canceled check right now”
The caller said “well it takes us another 10 or more days to post it to your account” By her logic I would have to pay the bill before it arrived in the mail in order to be on time.
I never charged another thing to that card and just paid off the balance and closed the account and won’t do business with that company again.
I still worry abou tthe state AGs–a lot.
But if they “get” it and their constituents “get” it, thay may toughen up a bit.
Yeah, I re-thought that after I posted it.
I know how much I’ve been helped by seeing Progressives post their diaries, and comments, especially on FDL!
Thank you,
CassandraCynthia.It does boggle the mind that banks were too mismanaged to realize a major source of insecurity in their very existence – that their own practices explicitly violated local law and the terms of their contracts with the securities industry, which very likely destroyed their secured interests in millions of mortgages.
Did they not realize their jeopardy, did they imagine it would go away because they were BANKS, or did they choose the wrong methods to fix or hide it, and are now in the process of being found out?
As you say, if these “securitized” assets are not secured loans, then investors will come rumbling in like a tsunami, wanting their money back plus costs and possibly compensation for fraud. What are the odds Team Geithner is already working on a settlement for that looming crisis, too?
In the collections industry, the trick with old debts is to get the debtor to re-up, to recommit to repay. Even a $10 payment on a $10,000 credit card debt restarts soon-to-expire statutes of limitation. That preserves the creditors’ ability to use the court system to collect it, which includes the right to obtain a judgment lien that gives the creditor a priority in bankruptcy.
Here, a surreptitious program under which banks agreed to modest write-downs of mortgage loans in exchange for new documents would have quietly solved a critical, but not the only, bank problem. Banks would have created the image that they were good guys and responsible lenders, strengthening their hold over both consumers and the government. The new mortgage documents could have been properly handled, thus re-establishing lost security interests in millions of mortgaged properties.
There were obvious precedents. Telecomms used a similar surreptitious program post-9/11. They turned over the cell phone parc with newer GPS-enabled phones. They achieved it in short order by offering upgraded phones, deep discounts, easier customer contracts, and other marketing gimmicks. The real rationale was national security-driven: to ensure that mobile phones were GPS-trackable and to ensure that customer data was not anonymous, but was as detailed as possible.
For banks, there are several systemic impediments. They would have to realize their plight, set aside their hubris and conclude they have to do something practical to fix it.
Achieving systemic rather than modest improvements would require coordination among the top half dozen lenders. They would have had to devise, agree on and implement changes to MERS and to its and their own operating procedures. Most importantly, they would have to substitute the redocumented loans for the old, now unsecured loans in the many securities they were incorporated into.
I suspect that required too broad a vision, too much humility and too much work. It would have required a considerable, coordinated PR campaign to sell the rationale for it to government, each other and millions of customers. It would need a back-up plan if the truth were outed and regarded as credible. I suspect the easier course was to attempt to bluff and buy their way out, which they are still in the process of doing.
Now, of course, homeowners and their lawyers are in the know and unlikely to agree to enter into new documents without stiffer write-downs. Many do still want to stay in their homes and communities and get back to the rest of their lives. Property prices have fallen further and continue to fall. Jobs are harder to find, pay less, and are less secure. There’s hope that a local judge might find lenders in such contempt that they wipe out a mortgage note completely, leaving the property free and clear.
Banks could still fix their problem with programmatic revisions to mortgages and their documents. But it will cost banks billions and several years of effort – a whole management generation. But such changes are antithetical to their vision, their business models, and to the compensation structures and high rates of return the latter are built on.
I don’t think top executives and their direct reports have it in them to go that route; it would be like leaving Manhattan for Cleveland. I would like to be wrong, because that route wold yield systemic improvements and lowered risk for everyone.
Such changes would also require a reversal of the big banks’ and MERS’ thumb in the eye approach to local fling requirements and to paying their associated fees. All the states and DC are now aware that they’ve lost billions of badly needed revenue – and access to data on who owns and is responsible for real estate in their jurisdictions – for the banks’ convenience.
Great job, Cynthia. I remember you warning about this a long time ago and you were right. I hope that you are also right that we are at a tipping point. It seems like we should have been at a tipping point a long time ago, but the banks/wall street had their government run interference for them. Now though, hopefully, enough home buyers and owners of the unsecured “securities” have become aware of the fraud and can bypass the obama-geithner-summer firewall and fight the criminal enterprise system in the court room.
Z
I was referring to the correspondent’s habit of characterizing this as “sloppy” rather than fraudulent and outright criminal.
The 60 Minutes piece could have been a lot stronger, IMHO.
Cynthia –
Just wanted to make sure that I congratulated and thanked you for all you’ve done on this subject. Didn’t want my criticism of the 60 Minutes piece to be misconstrued as criticizing you in any way.
Keep up the good work. You are always informative and usually WAY ahead of the curve.
Cynthia, Really Good Work.
Something to think about, what would the legislative fix to the Banks problem (I suspect there is not one, of it would have slipped through congress already).
Congrats, and what a ton of work.
It’s all been far, far stranger than fiction.
And anyone not convinced by massacio, Yves Smith’s post, or Cynthia’s work should pick up “The Monsters”, by Michael Hudson about predatory lending and the mortgage fraud. UNbelievable!!! (It was an FDL Book Salon selection.)
If this were fiction, I’d dismiss it all as implausible.
And keep watching, because the American Banker’s Assn and the Chamber of Commerce are vampires who have not yet had the economic dagger driven through their hearts; those outfits live to perpetrate crony capitalism.
Agree that “60 Minutes” did a fine job. (I was shocked to see what Linda Green really looked like — so diverse! so multicultural!)
Cynthia, bmaz, EW, massacio, Yves Smith and Lynn Syzmonic… Thank you.
Three weeks ago, I was at an academic contest and started talking with a parent about the mortgage crisis. They did not know anything about what was going on. They wanted to know how I knew so much. I pulled out my phone and pulled up posts by you and others from FDL and walked the person (and the many listeners who leaned into the conversation) through the story. One person listening was a lawyer. Her husband turned to her and asked, “Is this lady full of bull about the mortgage crisis?”
“No!” said the lawyer wife. Turned out she was a well connected lawyer.
She reinforced what I shared and the articles I was reading from from FDL.
Then came the kicker question from one of the listeners. “Why isn’t the media all over this story? THIS STORY is going to cripple our nation. Where the hell is the media?”
I replied, “I only read FDL and a few other resources. The MSM just fails constantly and it a serious matter of national security, quite honestly, to have the fourth estate dead from the neck up.”
I also recommended they start reading Rolling Stone and pay attention to Matt Taibbi.
Many thanks for all your hard work and for giving me the tools to talk to the person on the street about such a grave concern for our nation.
Great comment, great story.
Great story and nice work!
Just awesome to read that . . . lil surge of hopey.
Mz. Kouril, once again you continue to peel back the layered onion of this issue and all its nuances.
To you and the others Klynn mentions in her comment I am extremely greatful, as it’s an ugly, sordid, deep and dirty and complex mess of shit.
Thanks for the daylight and sunshine on it!
Rcc’d.
“Most importantly, they would have to substitute the redocumented loans for the old, now unsecured loans in the many securities they were incorporated into.
I suspect that required too broad a vision, too much humility and too much work. It would have required a considerable, coordinated PR campaign to sell the rationale for it to government, each other and millions of customers. It would need a back-up plan if the truth were outed and regarded as credible. I suspect the easier course was to attempt to bluff and buy their way out, which they are still in the process of doing. ”
No, the problem is much deeper than that. As reported by Yves Smith and a few others, the vast majority of trusts were established under New York trust law. To achieve the tax status required by investors, all assets of the trusts (i.e. mortgages) had to be finalized within a 90 day window of the trusts’ establishment. Those windows closed years ago.
It is not possible at this late date to ‘substitute’ assets.
If the trusts could have been reopened and documentation righted, the widespread fraud and document forgery that has occurred would not have been necessary.
It’s not just that the banksters created an unholy mess, they created an unfixable unholy mess.
As a nice follow-up to this story, Lynn Szymoniak’s foreclosure was dismissed in court today, without prejudice, unfortunately, but still dismissed. The court gave the bank another chance at a bite of the apple by leaving open its option to re-file within 30 days. If it has the chutzpah to do so.
One does have to wonder just how bad a bank’s documentation has to be to earn a dismissal with prejudice. I mean, does the paperwork have to be written in pink crayon?
http://4closurefraud.org/2011/04/05/victory-our-60-minutes-hero-lynn-szymoniak-had-her-foreclosure-case-dismissed-today/
Thank you, it’s heartenig to hear that