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Empty. (photo: SuziJane, flickr)
The lawsuit was filed in the New York Supreme Court, New York County (that’s Manhattan to you off-islanders) on Monday. The Plaintiff is German Bank HSH Nordbank and it accuses Barclays of selling securities based on trusts that were supposed to have mortgages in them, but were actually empty.
You know, empty because the mortgages were never properly transferred, which led to all that forgery and perjury that the 50, erm 49, state AGs so cluelessly tried to immunize as “sloppy paperwork”?
The Financial Times is reporting
According to the lawsuit, none of the 2,000 mortgage loans sampled by bank-hired investigators was assigned into the trusts before it was sold to investors. The investors say they would not have bought the securities because the lack of paperwork would make it hard to take action against homeowners who failed to pay their mortgages and could call into question the securities’ tax-exempt status
The Wall Street Journal has a somewhat snarky, but chillingly accurate quote from the Plaintiff, which I’ve bolded below:
In its complaint Monday, HSH Nordbank also alleged that all of the mortgages weren’t assigned to trusts backing the securities as promised. By not doing so, it hinders the ability of the trusts to foreclose on the mortgaged properties, according to the lawsuit.
“Indeed, without such assignment of the mortgages into the trusts, these so-called ‘mortgage-backed securities’ were not actually backed by mortgages,” HSH Nordbank said. “Plaintiffs would not have purchased these certificates had they known they were not backed by collateral or the notes.”
Yes! Finally the lawsuit that rips the scab off the festering wound of our foreclosure crisis. This is the lawsuit or even criminal prosecution that DOJ should have brought long before this. This is the easy to prove or disprove low hanging fruit lawsuit.
The investors in RMBS have bought a big empty bag of nothing that was misrepresented to them as being a chock full of mortgages. This is fraud in its most basic form, a classic bait and switch.
53 Comments
What legal twist will schneiderman do to make this problem go away? There can’t be any bad outcome to be shown to the peasants so I’m guessing some kind of monetary reimbursement without any guilty plea.
havent been following…did he go to the darkside too?
Not to join your cynicism too far, but hope now…is infernal…
So, didn’t you forget to add there might be some big ol’ indemnification clauses in any deal?
Thanks for the news, Cynthia. Guess we’ll see what pops.
Obama on December 11, 2011:
“I can tell you, just from 40,000 feet, that some of the most damaging behavior on Wall Street, in some cases, some of the least ethical behavior on Wall Street, wasn’t illegal.”
NY Supremes in the city where the action takes place. That will turn some heads. Thanks for the very interesting latest lawsuit. So where does the appeal go? Could be a big anchor for bank stocks. Markets have jitters with Spain tanking. Big squeeze on banks from Feds, Property owners and MBS holders. Lookout taxpayers.
The lawyers and the courts are going to be backed up if this suit flies.
very comforting, i took huge losses during the dot com debacle…it is totally rigged,
Cynthia, it appears you figured this out waaaaaay ahead of all the genius white-shoe lawyers. You should be so proud of yourself. AND get a % of any recovery, but I guess you’ll have to settle for the pride lol. ((((((Cynthia))))))
Operations manager at local BofA says every six month a new set of policies come down from Charlotte and it is very confusing. The latest is a $25.00 monthly fee for under $1,500.00. The BAC stock is down to 9.2 wonder if Buffett is nervous yet? The Banking industry is pinched and desperate. Damon JPMorgan gets $20 million go figure.
yes!
as g.singlaub said “when assholes start fighting is when shit happens” -
the take away from this is that our so-called enforcement officials (nationwide) were either asleep at the wheel, were scared off, or are trojan horses for the FIRE industries that have consumed the world in their conflagration of greed …
it aint over yet
I can’t find this story anywhere else. Looks like an exclusive for FDL and you.
So now we can at least hope to begin.
Bill Black: “I offer the following scale of unethical banker behavior related to fraudulent mortgages and mortgage paper (principally collateralized debt obligations (CDOs)) that is illegal and deserved punishment…
• Only fraudulent home lenders made liar’s loans
• Liar’s loans were endemically fraudulent
• Lenders and their agents put the lies in liar’s loans
• Appraisal fraud was endemic and led by lenders and their agents
• Liar’s loans could only be sold through fraudulent reps and warranties
• CDOs “backed” by liar’s loans were inherently fraudulent
• CDOs backed by liar’s loans could only be sold through fraudulent reps and warranties
• Liar’s loans hyper-inflated the bubble
• Liar’s loans became roughly one-third of mortgage originations by 2006
Each of these frauds is a conventional fraud that could be prosecuted under existing laws.”
Operative word, in my opinion, is “SOME”. That, alone, should have pushed our DOJ to investigate and prosecute, which they have not. Obama’s excusing “some” of the (egregious)(unethical) behavior, was not, nor should have been seen as, a blanket pardon of the behavior NOT included in the word “some.”
I presume the defense is based on “sophisticated investor” principles…how much weight do we think that will carry?
Remember, schneiderman was appointed to the state attorneys general committee that came up with the $25b settlement and he hasn’t been heard from since.
I’ll hold my breath until indemnifications are meaningful. As it is, there should be prosecutions as well as indemnifications, but the indemnifications should be to the home owners, not the other banks.
Search on the ft.com title “HSH sues Barclays over mortgage securities” got some blog and other news articles. Seems that HSH Nordbank has been patiently after Barclay’s at least since last autumn with various filings, some of which are subjects of other news articles, such as this one from Feb. 23: HSH Nordbank Sues Barclays Over Mortgage Backed Securities
, which is case HSH Nordbank AG v. Barclays Bank Plc, 650508/2012, New York State Supreme Court (Manhattan). Some of this history seems to be spelled out in the WSJ article to which Cynthia linked.
But the real news this weeks seems to include the addition of those claims about just how empty the so-called trusts are, per the quote from the article. That’s way, way bigger than the charges in the earlier findings that percentages of owner-occupation and that sort of thing were misrepresented.
I wonder if Barclay’s were caught a bit offguard. How many other filers of lullaby summonses that the bankcritters use to scare their children at story time are in reality just waiting for some reports to be filed?
The AGs have all know about this CRIME and all the CRIME committed by MERS which improperly transferred titles in the country for years, thus BREAKING THE LAW.
Where is Holdner? Where are the state AGs? You and I can go to jail for stealing a loaf of bread, but the people who committed this fraud and crashed the world economy get BAILED OUT.
I know I post this link a lot, but people have a HARD TIME understanding the enormous amounts of money GIVEN to the banks that caused this mess. $15 TRILLION dollars in less than one year.
Bailout Costs vs Big Historical Events: http://www.ritholtz.com/blog/2009/06/bailout-costs-vs-big-historical-events/
oh right,so many sellouts,cant keep track
Apparently this German bank is suing just about everyone involved with gambling with Amerika’s housing:
UBS Wins Dismissal of Fraud Claim in HSH Nordbank Suit
I wonder if they’ll prevail in this suit against Barclay’s either:
HSH sues Barclays over mortgage securities
So, apparently, no one has a problem with the fact that the American people’s homes were used as collateral for fraud, they just have problem that no one except the American banksters won any $$$$$$..
Mitt is the presumptive nominee and Obama is the nominee. So the next four years are already set for Dimon / Blankfein and their cronies.
Move along. There’s nothing to see here.
When I get back to the USA, I intend to chase my state AG (Jepsen, CT-D). I want to know how his signature on the settlement benefited the people of CT.
And if he won’t budge, I’ll be writing LTTEs to ask the CT Speaker (Donovan – D) to call on Jepsen to disclose his reasoning. Donovan also happens to be in a Dem primary for an open Congressional district (Murphy is going for Lieberman’s Senate seat).
Hopefully one of the 8 other candidates (3 D & 5 R) will have the brainpower to recognize that good policy also happens to be good politics.
The fact that Obama coddles criminals and opposes the rule of law (including assassinations of Americans, etc.) is unacceptable.
Both parties are institutionalizing the two classes of citizenry. For that, both parties must go.
For the vindictive bitters it doesn’t matter what he actually said and knowingly implied.
If the plaintiff is able to prove this, then they never even OWNED the mortgages to begin with, and should not have to take the hit for any defaults. They should be able to recover their original investment, in cash. Of course, the rule of law no longer applies in the USA – witness the MF Global theft of customer funds. Bankster crooks fule the roost!
I’d love to say something dramatic, but so tired can barely think…just saying, I’m glad to hear about this. Hope it’s the beginning of a flood of similar lawsuits.
Thanks for the post…I hadn’t heard about the lawsuit, and probably wouldn’t have without your reporting.
Thanks for this news and analysis, Cynthia.
Do you have any specific evidence to back this up? Could you start with a description of the buying/appraisal/lending process and indicate precisely where the appraiser/loan office committed fraud?
I can agree with you other bullet points (although I’d say they were hard to prove in court).
Don’t know what evidence Black used but there’s this …
Did you read the Financial Crisis Inquiry Report—by the government itself— which came out in January, 2011? If not you will get a eyeful. It is truly unbelievable that none of this was followed up on and maybe now, just maybe, investors will have a shot at getting the justice none of the rest of us seem able to get.
I genuinely fear for the lives of the plaintiffs. This is the kind of system-challenging that gets environmentalists and others killed.
I hope that you can get some response, but I won’t hold my breath in anticipation of a good result.
The appraisers are independent contractors who were hired by the bank.
I don’t have any experience with appraisals, but where I am houses need to be inspected before being sold. The real estate agent usually arranges that. House inspectors learn pretty quickly what sort of inspection to make, if they want repeat business; if they find lots of things wrong, they probably won’t get any more jobs from that real estate agent.
I would be surprised if appraisals worked any differently. Give the appraiser an idea what sort of valuation you’re looking for, and a lot of them will do their best to come in close to that number. And if you’re playing games to inflate the value, you’ll find an appraiser who’ll cooperate.
Please, please, please let this be the one that finally splits the whole thing wide open!!!!! Of course I have that same thought every single time there’s another lawsuit, and it never happens. It makes me want to scream.
That Godiva bag seems about as good a place as any to look for a mortgage, and the kitties about as skillful as the Obama administration at finding one.
At least with Godiva you have a chance of finding something yummy.
A friend of mine is an appraiser. I remember hearing from him around 2008 / 2009. At that time, he looked back over the past several years and explained the difficulty he had in getting business because he was trying to give honest values of the day… not the bank’s desired values. But before criticizing him, keep in mind that around 2005 / 2006, houses were going on the market and selling within 24 hours. Everything was moving so fast, it wasn’t entirely unrealistic for two different appraisers to have two different values on two consecutive days. Houses were moving and prices were rising.
The fundamental issue is that the entire system was rigged.
WRT proving criminality in court, I’m confident that would be tough. But everyone — retail bankers, mortgage brokers, appraisers, investment bankers — knew the deal.
The main problem is that Obama and his cronies have no interest in prosecution because no later than January 2017, they’ll all be wanting to collect their paycheck… just as the MOTU have promised them.
The appeal, which won’t happen for a long time, since the complaint has only just been filed, so there is no decision to appeal on any near horizon, would go to the Appellate Division, First Department. It is also in Mnhattan, just further uptown.
I got it from Wall Street Journal and Financial Times. Not an exclusive for me at all. I quote and link to them both in the post.
And Bill Black is correct on all of those points.
This lawsuit doesn’t even hing on whether the loans in question were liar’s loans, snice no loans at all seem to have have made it into the trust.
Yes, the NEWS is not that some investor is suing a bank over crappy RMBS. There’s been tons of that going on for the last couple years.
The NEWS is that for the first time somebady is actually saying the emperor has no clothes/the RMBS trusts are empty.
Up until now, I think US investors have been afraid to say that b/c of the fear that it will set off the second part of a double dip depression.
I’m guessing german banks care more about their own survival than the survival of US banks or the US economy. Or they have finally come tohe realization that “extend and pretend” [Marcy coined that] is delaying any meaningful recovery from the first depression and it’s time to cut out the cancer of these RMBS.
I think appraisal fraud in the later yearrs of the bubbble will be hard to prove, if the appraisal were done solely on the bais of comps.
What you would need, same as with robo signers, is whistleblowers. I was shocked (in a good way) that so many robo signers were so willing to admit what they had done. So, it may be that appraisers will turn up who will testify to being pressured to put in higher dollar amounts or to use inappropriate comparables to inflate the appraisal.
Ah, alone in the land of EPU!
Not quite alone, Cynthia. I’m keeping you company in EPUland! Good post. Recc’d.
No, no not in EPU land!
And I think some Wheelers will make it this way too.
Thank you for a great “No clothes” post.
Really good news. Is there any way this could impact the settlement?
Just this statement alone will keep me from voting for him. I keep wanting to find something to change my mind, but things like this just kill me. How does a grown man with his background and stature, in all ways, justify those comments and the disingenuous nature of most things he says concerning middle class victims.
“You should take those guys to court for selling you an empty sack.”
“But if I take them to court, they’ll get mad, and I won’t get anything, and besides, the judge will think I’m stupid for buying an empty sack”
“So what are you going to do about the empty sack?”
“Well, I was thinking that if I waited until things settle down, maybe they’d put something in the sack to make it worth something.”
“So what do you think they might put in the sack?”
“I don’t know, I just keep looking in there, hoping that something will show up.”
From Kassandra’s first link, about UBS winning dismissal of fraud suit on appeal.
Look, it’s all very simple: Eventually this will get to the Supreme Court which will invalidate laws (including state laws) that require deeds and other such docs to be filed prior to sale. Voila! Problem solved.
Of course, the idea that investors who can’t be assurred that they’re really buying what they think they’re buying might just stop investing will not occur to anyone until after the banksters are out of jail free.
The settlement is currently a done deal. If it turns out that the banks made misrepresentaitons of fact to dupe the AGs into the settlement, maybe it could be unwound.
I’m not holding my breath.
LOLOLOLOLOL
That’s the mindset in a nutshell. I really enjoyed your dialogue
That dismissal relates to an earlier –and much harder to prove — claim about not adhereing to underwriting standards and misrepresenting the loan to value ratio.
This has been what has driven me nuts for the last couple years. They kept going for the hard to prove cases instead of the low hanging fruit of the —> NO ASSETS IN THE TRUST and the realted perjury and forgery of the robo signing.
It make the robo signing immunity all the more galling.