The Obama plan, to create and fund public-private partnerships to buy toxic loans and securitized assets not only will not work, but will be the final blow to a global economy bloated with derivatives that cannot be legally linked to the real estate they represent. The government's dirty little secret, which it has been suppressing for months, is that most adjustable rate mortgages were illegally securitized in the haste to convert toxic loans into fee-generating mortgage backed securities.
Judges across the nation, including Boyko, Rose, Kurtz, Schack, Rosenblatt, Bufford, O'Malley, Shaw, Bryant and Foley have issued orders dismissing foreclosures brought by lenders that have illegally securitized loans and are no longer current holders of the notes. These "quiet title actions" have forced lenders, including Chase, Citibank, Wells Fargo, Washington Mutual, Countrywide, Lehman, Shearson, Indymac, Bear Stearns, Wachovia, and Bank of America to unravel their notes' dizzying journey from the mortgage closing to an investment bank or depositor, then to a series of trustees who pooled and sold the loans and issued shares of mortgage backed securities. What makes these securitizations illegal is how fraudulently they were conducted, by foregoing proper assignments and transfers required by law to secure an interest in the underlying real estate.
Now, the Obama Administration not only wants to continue this fraud, but is planning to reward the very investment banks and hedge funds that were architects and participants of the securitization that created the global financial crisis.
While this is devastating news to taxpayers who will be stuck with more debt, it is great news for homeowners' with securitized loans. Ironically, their mortgage lenders' haste to securitize their loans has provided a security blanket that protects them from foreclosure. In fact, many homeowners already own their homes free and clear and just don't know it yet, hence the purpose of my new book. Consider this reversal of misfortune divine intervention against a greedy global conspiracy aimed at defrauding homeowners and stealing their homes.
But don't look to the federal government for help, as they have been part of the conspiracy. The Obama foreclosure plan, wise to the fact that securitized mortgages cannot be legally modified, is focusing instead on homeowners not in default, leaving another ten million homeowners hung out to dry. The research group, Realtytrak estimates over three million homeowners now face foreclosure and another six million will soon be in payment shock when their toxic loans reset this year, forcing them into foreclosure.
Like an uninvited and unwelcome Santa Ana, millions of American homeowners are reeling from a blast of illegal foreclosures and unlawful evictions. Tragically, while many have already turned in their keys, others are quickly learning if they can find fraud, they can forget foreclosure. The recently won class action predatory lending lawsuit, The People of California vs. Countrywide, which settled for 8.7 billion dollars, has been a wake-up call to many distressed homeowners now empowered to wage mortgage war. Homeowners already kicked out of their precious homes can file fraud claims post eviction.
And there is plenty of fraud to go around: fraud in the solicitation, processing, closing, securitizing and servicing of toxic mortgages; fraud in the courtroom as lenders' attorneys file fraudulent foreclosures; fraud in the packaging, selling and credit-rating of mortgage backed securities; and fraud in the illegal modifications of securitized loans.
While the government keeps bailing out the very institutions at the heart of the fraud, like the mortgage giants and their insurance company, there just isn't enough money in the world to cover the costs of bad loans, litigation, credit default swaps and fraudulent workouts. A better move would be to quickly extinguish these loans upon evidence of homeowner fraud.
You may be wondering, how did this mess happen? How did the economy just ten years ago, buoyed by a transformational president and a budget surplus, end up in a recession soon to become a depression? The answer is greed.
The derivatives explosion, coupled with the Fed's lowering of interest rates and the Senate's relaxation of credit standards led Wall Street to create toxic "non-traditional loans" sold to homeowners purely to generate profit. These include hybrid adjustable rate mortgages, no doc loans and even NINJA loans, made with no income, no assets and no job. As the loans changed hands during each stage of the securitization process, fees were paid in the form of yield spread premiums, kickbacks, commissions, referral fees, bonuses, closing costs and profits.
It has been nothing short of a conspiracy to defraud homeowners, with everyone from the loan broker, to the loan officer, to the appraiser, to the title agent, to the servicer, to the Depositor, to the Trustee, to the foreclosing Trustee, to the lender's attorney -- all on the take. But homeowners are wising up, and hiring attorneys skilled in predatory lending litigation.
Southern California commercial litigator, Robert Allan of the Robert Allan Law Group, says this: "These claims can be won if counsel for the homeowner can prove the lender's intention to fraudulently induce the homeowner into a transaction for the lender's sole benefit. A lender has a statutory duty to ensure a homeowner has the financial ability to repay a loan for their home." Allan believes a forensic audit of the loan is crucial to establishing the lender's intent and in evaluating the merits of a homeowner's claim.
Nationally recognized forensic mortgage auditor, Marie McDonnell agrees, "A mortgage audit these days is a search for fraud in the inducement, origination, closing and servicing of toxic loans. It is the homeowners' best plan of attack against their predatory lender and a sure defense against foreclosure."
McDonnell, along with other advocates, auditors and attorneys, believes over 80% of adjustable rate mortgages were fraudulently induced so the lenders could quickly transform the loans into profitable mortgage backed securities.
Next to California's rapidly growing foreclosure crisis, Florida, not far behind, has taken up the fight. Attorney April Charney, known as "the foreclosure killer," provides attorney workshops to stop and reverse foreclosures, while litigators across the nation focus on educating judges about the illegal machinations inherent in securitized mortgages. Charney says, "It is common to prove that transfers and endorsements of notes were not properly made, and the real note holders are impossible to identify. The securitization process has failed, and the lenders cannot live up to the claims and contracts outlined in their 10 and 8K Securities and Exchange Commission filings." By demanding that lenders prove their right to foreclose, Charney untangles the covert interweaving of conspiring mortgage brokers, lenders, investment banks, depositors and trustees who had their hands in the securitization cookie jar.
My upcoming book, entitled Mortgage Wars: How to Fight Fraud and Reverse Foreclosure not only helps homeowners overcome payment shock and post traumatic stress disorder, but leads them, step by step, into a plan of engagement against their predatory lenders, including how to evaluate their toxic loan, get it audited, rescind it and hire the right attorney to take their lender to court.
Predatory lending lawsuits not only bring quiet title to the court's attention, which will result in foreclosure dismissal, but pay substantial damages to homeowners, including a full refund from their lender, as well as attorney fees. Luckily, laws like The Truth in Lending Act and the Real Estate Settlement Procedures Act, fall squarely on the side of defrauded homeowners. Other typical causes of action include fraud and fraudulent misrepresentation, unfair competition and unjust enrichment. I discussed this issue with Senator Arlen Specter during a recent dinner and he agreed that victimized homeowners ought to go before a judge and demand justice.
This road to reversing payment shock, delinquency, default, foreclosure, or even eviction -- by filing a predatory claim, like Bryan and Susan Andrews did against Chevy Chase Bank, focuses on the lender's fraudulent misrepresentations and predatory practices. While the Andrews' lawsuit has yet to reach class action status, the couple walked out of court owning their home free and clear. Their Wisconsin attorney, Kevin Demet, is fighting for class action status straight to the Supreme Court. He is encouraging other attorneys who represent defrauded homeowners to do the same.
To date, the media has had it all wrong, painting a false picture of a nation of deadbeats who sought liar loans. In reality, the demand for derivatives led to the conspiracy to defraud homeowners and investors alike in a parallel scheme of falsely inflating loan amounts, real estate values and credit ratings.
And, while homeowners have an arsenal of legal weapons at their disposal to fight their mortgage wars and win, they need to be shown, step by step, how to do it. The home is the family's sanctuary and psychological haven. Ripping homeowners from their homes is not only wrong, it is extremely damaging to the family system and has already proven fatal in some cases.
As far as the ballooning government bailout goes, there is not enough money in the world to save toxic lenders from their eventual fate. While the Obama Administration should follow the lead of Ohio, which insists that lenders prove their right to foreclose before filing foreclosures, the nation of enraged homeowners will more likely litigate their cases en masse in order to remove toxic lenders from title via judges' orders for re-conveyance.
However, if, in a fantastic and improbable flight into health, President Obama decided to play Robin Hood, and demand toxic loans be extinguished, vindicated homeowners would be able to quickly reverse the recession. That would be an economic stimulus plan that would actually work, rather than handing the predators more taxpayer money taken from of the pockets of defrauded homeowners. But denial runs deep and cronyism runs deeper. When the Administration learned it couldn't beat the holders of mortgage backed securities into rewriting pooling and servicing agreements, it decided to join them. By relieving predatory lenders of their toxic loans and investors of their worthless securities at the taxpayer's expense, the final nail on the coffin of our nation's economy will be in place.
Mortgage Wars will be available in bookstores in June. Or go to www.yourmortgagewar.com to order an advance copy and find resources.