What Is Securitization and Why Is It Fraudulent? Part 2

In last month’s issue, I began to explain exactly what securitization is and why it is fraudulent.  For several years the mortgage banks in this country were flat-out making up transactions and trusts to cover for the fact that they were pocketing their investors’ money.  But that wasn’t enough for them.  They bundled up the loans, intentionally loaded them with toxic mortgages to increase their rate of return, and sold them to themselves for a “profit.”

But what does this all mean for the title on a property that had a loan go through this process?

Basically, the title was flawed from the get-go.  Nobody who was a signatory to the loan had ANY interest in the repayment of that loan.  MERS and all the others were just filling a role by pretending to be officials of the bank that was lending the money, when in reality they were a signature factory.  If the trusts had been managed correctly from the beginning, the name of the trust should have been on the note and on the mortgage.  They weren’t.  Instead the banks set up a huge maze of companies to process the loans with defective notes and mortgages.

When homeowners began to default on their mortgages, the banks began to claim they were taking losses on their “bonds,” and were rewarded, yet again, with huge insurance payouts and bailouts from the taxpayers.  Not only that, but the Federal Reserve began printing money to buy up $85 billion worth of bonds every month from the banks!  These are bonds that the banks knew were issued from made up trusts.  After the banks received these huge payouts, the investors whose money the banks used to start the process demanded their money back.  Next the aggregators who bundled all of these garbage loans together and sold them are being forced by the courts to buy back the loans they sold.  This means that a single loan has been paid off, in full, dozens of times before the bank takes the house back through foreclosure!

Basically, when the borrower signed the mortgage documents, they made two mistakes.  First they were agreeing to owe a third party that had no legal interest in the loan.  Second, the borrower was signing papers that allowed the people who took place in the securitization fraud to claim ownership of the loan in order to trade it, collect insurance on it, or receive a government bailout for it.

So you might be asking yourself “how can the courts enforce collection on a note that has already been paid off in full?”  That is what we are asking as well.  The courts have been allowing foreclosures and other claims by loan servicers where the creditors, lenders, and trustees for the lenders have zero interest in the outcome of the cases.  In fact, they are asking to be left out of the lawsuits because they can show no true evidence of a trust account from which the loan was made when the court demands it. 

There are a few answers. The first is that many judges have no clue what any of this stuff means.  They just don’t have the knowledge to understand the situation and make an educated ruling.  In some cases the court could simply decide that the borrower agreed to pay the loan, so it doesn’t matter how fraudulent it was, they should pay.  The more sinister answer is that sometimes the banks have been using fancy footwork, including producing fake documents to prove ownership of the loan and to deceive the courts.  There is good news, though.  More and more rulings are coming down that expose the banks for the frauds that they are.

Fortunately, with all of the fraud the banks committed being discovered and exposed; we investors now have a way to get the banks to negotiate on our terms.  By investigating the specific circumstances behind underwater homeowners’ loans, we are exposing this unbelievable and blatant fraud that can be used as leverage against the banks in order to negotiate huge discounts on note purchases.  This allows real estate investors to free homeowners from the burden of dumping money into an underwater home while also doing some incredibly profitable deals with multiple possible exit strategies.

If you would like more information on this awesome strategy, give my office a call at 706-485-0162!