If you’ve followed our presentation of the brilliant and tenacious, Nye Lavalle’s work, you’re going to love this one. Again, we strongly suggest that you read Parts I, II and III, before beginning to read this piece. All right, all right. If you’re impatient read this one first.
We think you’ll then go back and read the following.
Please read this as a hands-on guide, in plain English, regarding what happened in the Mortgage Securitization industry. An off-shoot of Investment Banking “financial engineering.”
[We always say that our intent is to give you: information, thus knowledge, understanding, confidence, courage and tools to Repudiate Illegal / Fraud Based Housing Debt. This series of articles constitutes all of those attribute.
This is part of the story of what happened– what was done – to multi-millions of homeowners with mortgages issued since 2000. This is the who, what, when, why and how.
We drew this material from his seminal report entitled:
”Report On Fraudulent & Forged Assignments Of Mortgages & Deeds In U.S. Foreclosures ” You can find the complete report here.
The point regarding this unique posting of Mr. Lavalle’s work is that he digs deep into the nitty gritty. The exact violations. You’ll see.
Continuing with Nye.
”WARNINGS, FORECASTS & PREDICTIONS
“75. I have written many reports on predatory lending, servicing abuse and fraud and have been an industry whistleblower having spent over 35,000 hours of my time and hundreds of thousands of dollars of personal and family resources investigating the predatory and fraudulent practices found in the secondary mortgage market.
“76. In 1998, I was one of the first individuals in the nation to allege that Fannie Mae and Freddie Mac were “cooking their books” via various financial engineering schemes. I also was one of the first to predict the current mortgage and Wall Street downfall due to subprime mortgages and mortgage securitization in the mid to late nineties in various presentations, affidavits, pleadings, and reports.
“77. In fact, the board of Fannie Mae and its CEO initiated an independent counsel investigation by Mark Cymrot of Baker Hostetler, of my allegations that also included the fabrication of assignments and misstatements of facts in legal pleadings and affidavits by servicers and their default servicing partners such as Fidelity National and its spin-off Lender Processing Services (“LPS”).
“78. False pleadings, fabrication of evidence, perjury, lost notes, missing assignments, and fraudulent assignments of mortgages created by the foreclosure mill law firms and servicers with Fannie’s knowledge, blessing, and even direction were a major focus of the investigation wherein these firms and servicers were warned about continuing such practices.
“79. Both Fannie Mae and the independent counsel accepted many of my facts and created new policies and procedures in Fannie Mae’s servicing guidelines that I contributed to.
“80. For over fifteen years, I have personally witnessed law firms, servicers, and vendors in the foreclosure and default servicing industry widely engaged in spoliation and fabrication of evidence while suborning as well as providing false testimony in foreclosure cases.
“81. I have repeatedly, as a shareholder of various mortgage related companies, brought these issues and evidence of such bad and potentially unlawful acts to the attention of various boards, CEOs, and the chief legal counsel who I have had many personal communications and meetings with.
“82. These warnings and communications, which began in 1999, have gone to the boards and C-level executives at Bear Stearns, EMC Mortgage, Washington Mutual, JPMorgan Chase, Ocwen, Merrill Lynch, Mortgage Electronic Registration Systems, Countrywide, Bank of America, Wells Fargo, Fannie Mae, and Freddie Mac.
“83. Since 2000, I have also personally provided my warnings and communicated to the leaders of three major trade groups involved in the mortgage, default servicing and foreclosure legal services including the United States Foreclosure Network (“USFN”), the American Legal & Financial Network (“ALFN”) f/k/a the American Financial Network (“AFN”) as well as the American College of Mortgage Attorneys (“ACMA”).
“84. Lawyers and law firms of the USFN and ALFN are commonly referred to in their industries as members of the “foreclosure bar” or “mortgage bar” and in the consumer advocacy practice as well as in the media as “foreclosure mills” or “foreclosure factories” for their “assembly-line” and mass scale legal operations that utilize “timelines” and advanced “technology” to “streamline the foreclosure process.”
“85. Members of the USFN and ALFN often compete and market their “processes and systems” rather than their legal skills and ethics.
“86. As part of my warning process, I researched and gathered hundreds of email addresses and phone numbers of partners and associates in USFN and ALFN foreclosure law firms and sent them copies of reports and communications wherein I warned them of dozens of fraudulent and unethical legal and business practices they and their clients were engaging in.
“87. At the 2000 National Consumer Law Conference in Broomfield, Colorado, I released two white papers and reports I authored. The first report was titled Predatory Grizzly “Bear” Attacks Innocent, Elderly, Poor, Minorities, Disabled & Disadvantaged and detailed Bear Stearns and its EMC Mortgage unit’s predatory practices in the marketplace. In the report I stated the following:
“a. This report documents what is now known to be one of the largest predatory lending, servicing and financial scandals in America. The report documents and provides conclusive proof of widespread corruption, accounting fraud and abuse existing at Bear Stearns & Co., a major Wall Street investment bank and related subsidiaries.”
“i. EMC Mortgage was later found by the FTC to be in widespread violation of various consumer laws and abuses that Lavalle detailed in his report and was fined $28 million.15
“b. However, the most pertinent predictive quotations in my report on Bear Stearns included:
“i. This report also details what could be one of America’s largest financial scandals ever, resulting from the development, placement and sale of various mortgage backed securities and ‘derivative’ products by Bear Stearns.”
“ii. This report is the story of one of America’s largest Wall Street investment bank’s ‘direct’ involvement in the development, making, and support of a nationwide system of predatory lending practices, frauds and abuses.” 15 http://www.ftc.gov/opa/2008/09/emc.shtm
“iii. The effects of Bear’s behavior has a wide range effect on many, not just the EMC customers being abused. This includes Bear Stearns’ own shareholders, investors, government and the public.”
“c. I also predicted the effects that Bear Stearns’ actions would have on financial markets that included:
“i. devaluing of various mortgage derivative products;
“ii. failure of major banks and wall street firms; and
“iii. reluctance of corporations, mutual funds and other investors to invest in legitimate mortgage backed securities.
“88. My reports and communications concerned many areas of predatory practices, but focused on several key areas that included the following predatory securitization practices I identified and reported on in my 20th Century Loan Shark report:
“a. Stamping, filing and recording loan and mortgage instruments that indicate loan was sold ‘without recourse’ when in fact there were recourse provisions;”
“b. Failing to record in country records the true and real ownership, assignment and endorsements of promissory notes, deeds and other mortgage documents which were part of sale, assignment or transfer;”
“c. Knowingly accepting loans and not disclosing to investors problems with loan documentation; missing, altered or fraudulent documentation in loan file; chain of titles and ownership; threatened legal actions; current regulatory actions or complaints made about loans assigned;”
“d. Reporting problems or improper custody, maintenance and control of promissory notes, deeds and other loan documents;”
“e. Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the servicer or securitizer does not have a real interest in;”
“f. Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the servicer or securitizer does not have in their custody or control;”
“g. Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the servicer or securitizer has offered for sale to someone else;”and
“h. Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the servicer or securitizer is owned by someone other than party identified in the prospectus.”
“89. In my the 20th Century Loan Shark report I also highlighted dozens of predatory lending “origination” practices that included the following practices:
“a. Asking The Borrower To Sign ‘Blank’ Loan Documents Then Filling Out Borrower’s Loan Applications Fraudulent Information;”
“b. Failing To Represent To Borrower Their Rights To Rescission;”
“c. False Representations To Borrowers By Word And In Writing Of Terms And Conditions Of Their Loan;”
“d. Falsifying Loan Applications & Documents;”
“e. Filling Out Borrower’s Loan Applications & Documents With Information Other Than What Borrower Provided;”
“f. Forging Signatures On Loan Documents And Required Disclosures;”
“g. Fraudulent Or Inflated Appraisals;”
“h. Intentionally Structuring Loans With Payments The Borrower Can’t Afford In Order To One Day Foreclose On Property And Earn More Profit;” and
“i. Providing False Or Fraudulent Information On Reg Z And Other Disclosures To Borrower.”
“90. However, of paramount importance to this case are several of the many practices I researched, identified and documented that I termed predatory foreclosure practices that included the following:
“a. Altering, redacting and whiting out documents, loan histories and evidence;”
“b. Bribery of court officials;”
“c. Destroying and concealing evidence, records, documents and complaints;”
“d. Filing of fraudulent and false affidavits by predatory lenders claiming that they own the note when in fact they are only the servicer;”
“e. Filing of fraudulent and false affidavits by predatory lenders claiming that they lost the note when in fact they never had control of the document;”
“f. Filing of fraudulent and false affidavits by predatory lenders claiming an indebtedness that is not owed;”
“g. Filing of fraudulent and false affidavits by predatory lenders claiming amounts owed that are non-recoverable from the borrower;”
“h. Filing of fraudulent and false affidavits by predatory lenders claiming control and custody of documents that are not in their control and custody;”
“i. Filing of fraudulent and false affidavits that claim to support knowledge of facts not known by the affiant;”
“j. Filing of frivolous motions for summary judgment;”
“k. Paying experts to provide false and fraudulent reports and testimony;”
“l. Providing false and perjured testimony in depositions and hearings;”
“m. Providing misleading and deceiving documents, records and loan histories as evidence;”
“n. Refusing to produce documents ordered to be produced;” o. Supporting motions for summary judgment with fraudulent and false affidavits;” p. Using corporate dummies as corporate reps that are trained to avoid questioning and obstruct justice;” and q. Witness tampering.”
“91. In the same report, I predicted the future effects on borrowers, the nation, investors, employees, and the financial markets. I wrote that “the effects of Predatory Lenders who are Wall Street Investment Banks on financial markets include:”
“a. Devaluing of various mortgage derivative products due to increased liabilities caused by predatory lending practices;”
“b. Failure of major banks and Wall Street firms if value of derivative products falls, interest rates rise and calls are made on credit enhancement guarantees;”
“c. Reluctance of corporations, mutual funds and other investors to invest in legitimate mortgage backed securities that are not predatory;” and
“d. Increased government regulation & supervision.”
“92. I wrote about “the effects of predatory lending actions on predator’s borrowers that included:”
“a. Illegal stripping of equity of customer’s homes;”
“b. Illegal foreclosure and loss of customer’s homes;”
“c. Emotional and mental abuse and distress inflicted upon customers;”
“d. Infliction of emotional duress;”
“e. Retaliation upon those who discover abuses;” and
“f. Divorce, family estrangement, death and imprisonment of customers and their family members.”
“93. I also wrote about the effects on employees, executives, and shareholders stating:
“a. Reduced stock and option prices due to adverse legal and regulatory decisions;”
“b. Reduced stock and option prices upon news of adverse legal and regulatory investigations;”
“c. Increase in legal expenses and fees to corporation due to unnecessary operational risks, assessments and decisions with a reduction to profit thereby reducing shareholder value, returns and dividends;”
“d. Increased management and executive focus and time addressing legal, noncompliance and regulatory issues;”
“e. Negative press and media reports and harm to the company’s image and reputation from the publication and exposure of repeated scandals;”
“f. Increased exposure to liabilities and government oversight, regulation and sanctions.”
“94. I also wrote about the effects of predatory lending servicing and securitization abuses upon local, state and federal governments who are affected in the following ways:
“a. Overpayment of false and fraudulent claims by federal government and mortgage insurers such as VA, FHA and HUD to the predators;
“b. Overpayment of false and fraudulent claims by GSE’s such as Fannie Mae and Freddie Mac;
“c. Increased taxpayer expense in use and abuse of court systems to defend or prosecute predator’s illegal actions;”
“d. Support and taxes exhausted by local, state and federal government for individuals who are forced to seek taxpayer support, living assistance, financial aid and living assistance due to a predator’s abuses;”
“e. Loss of tax revenue and income from taxpayers who are forced to file bankruptcy due to a predator’s illegal or overstated demands and foreclosures;”
“f. Increase in abandoned homes in communities across America due to predatory practices and wrongful foreclosures;”
“g. Increase in vandalism to homes in communities across America due to predatory practices and wrongful foreclosures;”
“h. Costs, expenses and manpower taken by government to examine, investigate and prosecute predatory lending operations.”
“95. In a personal paper I authored in 2004, I wrote the following comments, opinions, and critiques of the morals and hazards of Wall Street and the mortgage industry based on my research and investigation to that point in time:
“a. My personal disdain are for ‘secret societies’ that exclude others and attempt to use their collective power for the advancement of the personal and collective agendas that tend to target, discriminate, and harm others.
“This is especially true of Wall Street and the mortgage industry and will eventually end in its collapse, a calamity to which our generation has never faced.”
“b. In sport, skill, health, participation, teamwork and camaraderie are stressed as more important over the American value of winning at all costs. The view that there are only winners and losers is one founded on a premise that there can only be rich or poor or placing a bet on black or red on the roulette wheel. However, is the future of this or any other nation, a simple red or black bet? Is this what we want in our banks, insurance, and Wall Street firms that are gambling away our money in the house-run casino of mortgage and asset backed securities, credit default swaps, and other derivatives in an ever escalating Ponzi scheme? What happens when they crap out and people get wise to the fraud promulgated on all of us, borrowers, shareholders, investors, depositors, and public citizens alike?”
“c. Doctors and scientists save lives and improve human existence. Nurses care and heal us. Teachers teach and “care for” our young. Young men and women, go to foreign deserts to protect our lives. But, who does our nation reward? The banker or Wall Street wizard who manipulates digits on a computer screen using sophisticated statistical models that can attribute and place the risk of the bet, on our pension, mutual, insurance, and trust funds?”
“d. I have seen this first hand in my fight for ten years against predatory lending and corporate abuse on Wall Street where a few handful of greedy men and a few women have earned millions and even hundreds of millions by stealing the homes and equity of those who can’t fight back.
“What’s worse, like Enron, they have put our pension funds, mutual funds, trust funds and entire financial system at risk with their greed. Eventually, all of us will pay in one manner or another. Even the infamous Warren Buffet and Alan Greenspan have joined me in sounding the alarm. A few short years ago, some lawyers called me a Don Quixote and my girlfriend said last year that I had a Messiah complex. Before Enron and WorldCom, many prominent law firms and every major accounting firms, even Arthur Anderson, said I knew not of what I speak of and tried to paint me as unstable and crazy.
“Guess what, today it is the same lawyers, regulators and others who seek me out for knowledge and understanding of the complex schemes I had previously unraveled. If I am crying wolf, then I am happy to be in the company of a great man like Warren Buffet and a great mind like Alan Greenspan. This is no wolf cry my friends, the real truth is that many of our financial systems and enterprises are in reality one giant Ponzi scheme on the verge of collapse upon the right trigger being pulled.”
Ken here. What can I say, Nye Lavalle knows what he is doing and has been doing it for some time. In a couple of days we’ll be adding another article in this series, that carries the nitty gritty, exactly what the Securitizers and originators did that likely makes your loan illegal – to the benefit of you and your family.
See more of Nye Lavalle’s work here.
Print This Post