Author Archive

By now you have heard in the news about robo-signing, MERS, etc. and how the economy was brought down by Mortgage Backed Securities.  But what, specifically, does that mean and how does it affect us as homeowners and real estate investors?  As can be expected, the greatest financial fraud every pulled over in the history of the world began with taking away responsibility from banks and brokers…

When a broker purchases a stock or bond with your money, it’s standard practice to buy the stock in the name of the brokerage.  This was all well and good when the owners and partners of the brokerage were personally liable for all of the consequences of an investment.  After brokerages were allowed to incorporate and become “legal persons,” the owners of the brokerage houses were shielded from all of the legal and financial responsibilities for the consequences of their investments.  This took away all of the personal risk they incurred by making wild bets on exotic investments with their clients’ money.  After all, it was just the company that would get in trouble, not the individual brokers or owners of the company!

This left the commercial and investment banks free to concoct the securitization scheme.

The way a bond is supposed to work is that an investor purchases a bond from a trust.  The trust then was to use this money to purchase mortgages or originate their own.  The trust then uses the money made off of these mortgages to pay off the bonds to their investors.

That’s how it is supposed to work. Read More→

Is Buying a Note a Good Deal?

Posted on July 31, 2013 by

Which is better for real estate investors – buying a note in pre-foreclosure, buying the house through a short sale, or waiting until the house comes on the market as an REO? That depends on the difference in the discounts expected, the condition of the house, and the likelihood of reaching an agreement with the current homeowner to either move or purchase the note at a discount and remain in the house.

The discount on the note may well be less than the amount of discount the lender will be willing to take for the house as an REO. Having the note gives the note holder considerable flexibility—and some additional risks. The note buyer can decide to set up a new mortgage with the current homeowner, negotiate a “cash for keys” or deed-in-lieu of foreclosure with the homeowner, or may be stuck taking the homeowner through a long, drawn-out foreclosure process. If the latter happens, then the note buyer may well be better off waiting until the home comes on the REO market rather than tying up funds unproductively waiting for the foreclosure process to complete. However, if you have a cooperative homeowner, buying the note presents you with some incredible opportunities. Read More→

Lenders like to argue that when a homeowner gets behind on the mortgage the issues involved in foreclosure are cut-and-dried.  The homeowner owes on the mortgage, they have not been able to catch up over many months, so they should pay and/or lose the house.  The reality is far less clear-cut.  In many cases homeowners do not argue in court that they don’t owe on a mortgage; the real questions are who does the homeowner owe the loan to and does the party bringing a foreclosure action really have standing to file for foreclosure?

An audit ordered by San Francisco assessor, Phil Ting, of about 400 foreclosures was reported in a New York Times article by Gretchen Morgenson showing pervasive irregularities in how mortgages are written and how foreclosure filings are carried out.  While the study was specifically of problems with San Francisco area foreclosures, similar findings could be made nationwide.  For example, a recent whistleblower report on Wells Fargo exposed the systematic fabrication and alteration of mortgage documents nationwide.  Their fraud was so rigorous that they even took loans that were endorsed properly and altered them as well! Read More→

Mon, July 1st at 3:00 PM @Total Wine & More Perimeter
July 1st Meeting Before the Meeting
with Bob Massey

Bob MasseyOn July 1st at the “Meeting-Before-The-Meeting” at Total Wine & More located at 124 Perimeter Center W (see map), I am giving a presentation that you don’t want to miss. We’re going to be talking about the various strategies you can use for pre-foreclosure deals. Not only are we going to be discussing short sales, we’re going to be talking about how to bypass short sales altogether and going straight after buying the note. I’m also going to show why you might be sitting on a goldmine. If you know of anyone or know how to find people with Chase loans that are in default more than 90 days, you NEED to be at this meeting!

At 5:00 PM, Total Wine & More will be offering a complimentary wine tasting to all those who attend our meeting and wish to participate. There is NO CHARGE to attend this meeting or the wine tasting for Atlanta REIA Members and guests. Thanks Total Wine & More!

There are innumerable issues that can be caught in a forensic audit and used to argue either that a title is clouded or a foreclosure proceeding is improper.  Here’s a list of nine common problems that may lead to a positive outcome for a homeowner doing legal battle with a lender or servicer:

  1. An individual purporting to be an officer of one lender or servicer shows up as the officer of several other companies at the same time. It is improbable, if not impossible, for one individual to simultaneously serve as an officer of several institutions.  This is an indication that someone hired by a document processor was told to sign thousands of forms per day for many different institutions. Such individuals are required to swear by virtue of signing the documents that they have personally examined all documentation and personally know of the loan—again an impossibility.
  2. A name appears on several different documents for the same person but in different handwriting.  For example, there are many different handwriting samples of the same purported bank officer, Linda Green showing on thousands of different loan and foreclosure documents. Read More→

In recent Washington State Supreme Court decision (Bain v. MERS), the court ruled that the Mortgage Electronic Registration System (MERS) is not and cannot be a legal beneficiary under Washington State Law.  In effect only the legal holder of the note, the real creditor, has the power to appoint a substitute trustee in order to transact such legal actions as a foreclosure.

The court asserted that the power of sale of a property is a significant one and trustees have tended to ignore their duties and obligations.  The court believed it was time to swing a little bit of the power back to the side of the borrower.

Essentially, the court ruled that the lenders could not continue to routinely ignore the state’s laws regarding the recording of deeds and then turn around and use the same set of state laws to foreclose on a borrower.  The court also left the door open for those with legal grievances to ask for compensatory damages against MERS and those who used MERS in wrongful foreclosures.

The court made this decision in part because MERS never has anything to do with the actual financial transaction.  It never handles any of the money in the loan process, and it never has anyone on staff with personal knowledge of the principal for whom they are acting.  Therefore, MERS has no standing when it comes to a foreclosure. Read More→

In last month’s article I explained how the housing boom of the early 2000s created an equally big boom in mortgage fraud.  While the housing collapse changed the nature of the crime, the ensuing flood of foreclosures just gave the banks another reason to commit fraud.

Fortunately for homeowners, there has been a wave of investigative agencies that are exposing exactly what the banks have been up to.  While my last article covered the types of fraud that the banks have committed, this article will focus on the methods that investigators use to find the fraud in real estate deals.

Due to the fact that the fraud examinations are normally conducted with the purpose of being used in litigation, they tend to fall under the mantle of forensic accounting.  In other words, they are conducted with the assumption that the case they are investigating may end up in litigation or a criminal trial.  This means that fraud investigators must possess the skills to follow through with a mortgage fraud investigation from beginning to end.  This includes but is not limited to researching, collecting evidence, taking statements from people involved, and testifying to their findings in court or a deposition. Read More→

How Banks Are Committing Fraud, Part 1

Posted on February 28, 2013 by

Throughout the late 1990s and early 2000s, we experienced an unprecedented housing boom.  Easy credit flooded the marketplace and home ownership surged to unheard of levels.  Along with inflating an unsustainable bubble, the housing boom created a rich climate for mortgage fraud.

The bust that followed changed the nature of the crime, but it has also provided continued opportunities for mortgage fraud.  Fortunately for homeowners, there is a new wave of investigative agencies emerging that are trying to figure out just how widespread and insidious the mortgage fraud epidemic is.  Investigators hope the increased awareness will help to educate the general public about the threat that these crimes present.

The scary fact is that fraud continues at astounding levels.  The allure of mortgage fraud is clear – it can generate amazing profits with a relatively low risk of discovery.  After all, there is a byzantine mess of laws and regulations that govern the finance industry and keep all but the most ardent investigators from figuring out exactly what fraudsters are doing and how they can be prosecuted. Read More→

In my last article, I explained that there are two approaches investors can take to determine whether or not a lender has been negligent or committed fraud.  The first approach I described is to look through the paper trail to dig up issues.  The second approach is to follow the money.

Not many people truly understand how the mortgage and finance industries work.  It’s basically a shell game with them moving money around with little regard as to the laws and regulations that govern how banks are supposed to act.

They play this constant game all supposedly in the name of increasing the money supply. Attorney Neil Garfield describes the process as the bank starting out with $100 in the left pocket and taking $10 out to deposit in the right pocket, but still reporting to the SEC and investors that the full $100 is still in the left pocket.  When the next $10 comes out, described as trading profits or a fee, the amount in the left pocket is still reported as $100 rather than the $80 that is actually there.  Read More→

There are two approaches you can take to determine whether or not there has been negligence or fraud in the loan process.  Both paths can be equally effective in uncovering lender misconduct and providing you with leverage for negotiations with the bank.  One path follows the documentation from mortgage application through foreclosure documentation, and the other approach follows the money trail.  This article will examine how the documentation can lead to a damaging case against a pretender lender.  Our next article will cover the money trail method.

In order to prove that they have the right to foreclose on a property, it is becoming standard for lenders to be required to produce the original note on the property.  The note is required before a court will allow a lender to sell a property.  It must show that the lender is named with a recorded economic interest in the property.  However, in many cases these original notes have been either lost in the securitization shuffle or purposefully destroyed as the note bounced around from entity to entity.  The note could even have been Photoshopped or otherwise forged to make it appear that the entity trying to foreclose has the standing to do so.  Fortunately, the lenders are being called on it by the courts. Read More→

Bob MasseyOn January 7th at 3 PM at Total Wine & More located at 124 Perimeter Center W (see map), I am giving a presentation that you don’t want to miss. I am going to be going over the details of a $875,000 short sale I just closed that most investors would have abandoned months ago. Instead of giving up, I modified my strategies and ended up making more than if everything had gone according to the original plan! We are also going to be discussing mortgage fraud, securitization issues, and foreclosures. The banks have been defrauding homeowners for years, and we now have a way to use that to fight back against the banks and do some pretty incredible deals while helping underwater homeowners across the country.

The Mystery of the Missing Trusts

Posted on November 28, 2012 by

The more researchers and attorneys investigate the structure and composition of securitized trusts the more phantom-like they become. 

Amazingly, what is being found in many, if not most, is there was no  trustor, beneficiary, funding, assets, bank accounts or even the sham appearance of being managed by a trust department.  No one has even been moving money through the trust, or with reference to a trust, to its “holders.”

Often when investigators try to establish a money trail between the holders of a mortgage-backed security, to a pretender-lender and then on to a homeowner to close a specific transaction, that money trail does not exist.  There is no trail, for example, between a loan originated by ASBC 1234-1 Trust, a trust claimed by US Bank as Trustee, and a specific homeowner, and no evidence of any assignment to where the money has been transferred. Read More→