What the Banks Insuring Themselves Against Their Own Fraud Means For Your Investing Business

The last several months have been huge for real estate investors and homeowners who are fighting back against the banks. Court case after court case has been decided in the homeowners’ favor, and things are only looking better going forward. JPMorgan Chase has just been ordered to pay an additional $48 million in fines for using fabricated documents and now we find out that since 2014 the banks have been buying rescission insurance. But what does all of this mean for real estate investors?

In November of 2012, the president of DOCX, a subsidiary of LPS, pled guilty to producing over one million fraudulent mortgage assignments to be used in foreclosures. In many of these cases, the assignment was created to “prove” that a trust had acquired the mortgage on which it was trying to foreclose. This wasn’t some mistake; signatures were forged, job titles were made up, and notarizations were added after the fact to make things look above board. These fraudulent assignments were used in trusts controlled by Wells Fargo, US Bank, HSBC, Deutsche Bank, Citibank, Bank of New York, and JP Morgan Chase among others.

Despite this being widely known, the big banks got away with some fines as long as they promised to help homeowners out. Surprise, surprise, they didn’t help and JP Morgan Chase has just been fined an additional $48 million for failing to fulfill their commitment to help defrauded and underwater homeowners. This might sound like a lot, but JP Morgan Chase had a net income of $24.44 BILLION in 2015 alone. At worst, this fine is a slap on the wrist.

While they might not feel the sting from their fines, we are seeing that the banks are scared of something; rescission. Since 2014, the banks have been buying rescission insurance. Why are they doing this? Because they know that no fund managers will buy mortgage backed securities from the banks when there is a very real chance that the loans could disappear overnight! This shows that the banks attorneys understand fully that rescission poses a real danger due to the vast numbers of loans they created that were never consummated. Their scare tactics of sending out useless letters saying they reject the rescission will not work for much longer. In fact, sending out the letter just proves that they received the letter in the first place!

This is a great time to be a real estate investor working with distressed homeowners. What these decisions show us is that the law is finally catching up to the banks. Along with District and Appellate Courts all over the country, the Supreme Court has ruled as clearly as possible in the homeowners’ favor. With their ruling in the Jesinoski case, the Supreme Court has clarified that TILA rescission is a powerful tool to stop foreclosure and help homeowners stay in their houses longer. It also creates an opportunity for investors to do some pretty amazing deals. The tides have turned and the banks are being forced to negotiate on our terms. No more begging the banks to accept our short sale and REO offers only to have them demand ridiculously high prices. We can now get the banks to the table and demand that they prove they have the right to enforce a loan.

This makes it more important than ever that homeowners and real estate investors act NOW. This is a massive opportunity for real estate investors. If you know of anyone with a defaulted or underwater note, you need to get in contact with my office immediately at (706)-485-0162. I have spent the last two years building up a team of experienced attorneys and fraud examiners/forensic auditors who specialize in exposing fraud committed in the mortgage process and using that fraud as leverage to negotiate the sale of notes. This opportunity is not going to be available forever; we need to strike while the iron is hot!

We have a huge opportunity to help homeowners and do some great deals with multiple exit strategies. For more information, call me at 706-485-0162.