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Foreclosure Crisis Overview: Banks Run Amok
Basic background of the crisis and events leading up to it.
Turns out, the foreclosure crisis, which STARTED and keeps fueling our economic crisis, began over 20 years ago with Banks getting federal law changed to enable them to increase their private gains. Now they have defrauded almost everyone possible. Banks began this cycle of fraud by lying to Investors (ie: our Pension Funds) about the Mortgage Backed Securities they sold. All loans in these securitized pools were created to explode/fail, unbeknownst to investors and insurers. Borrowers were forced to refinance prior to loan "explosion/fail dates," which is exactly why banks created loans like that. Banks then kept all loan ownership records in MERS, a Members Only private database, hiding these records from everyone else. Banks used these loans/notes as collateral for short-term lines of credit instead of transferring the notes to the Mortgage Backed Securities they sold, creating great wealth for themselves, but defrauding both the Investors and the IRS. As this scheme began to come apart, banks set up investment departments to "short" the Mortgage Backed Securities they sold, generating huge additional profits for themselves while everyone else lost money. Then Banks fraudulently and illegally faked Loan Ownership paperwork which enabled them to foreclose on homes whose loans they did not own (dismissively termed "robo-signing"). Our county records are now filled with fraudulent paperwork, jeopardizing ownership for all properties and owners caught in this fraud - which turns out to be as many as 72M properties.
Below are the 12 Steps of Bank Fraud to clarify in what has actually taken place and why we’re in such a mess today.
Here are some graphics about the 12 steps you might find helpful.
Video Presentation 1, Video 2, all video overheads
12 STEPS OF BANK FRAUD (by the Banks)
100 Facts about Mortgage Securitization
Why Did the Banks Need to Falsify & Forge Documents?
CA Courts Rubber-stamping foreclosures by corporations
STEP 1: CHEAT County Recorders' Offices nationwide: establish MERS (late 1990s)
Using MERS eliminates recording Loan ownership changes at the county recorders' offices
Using MERS hides these ownership changes from the Public
Using MERS has cheated and still cheats our Counties out of billions of dollars of recording fees
STEP 2: CIRCUMVENT the SEC: use foreign corporations as Securities Vehicles
No SEC regulators; no prying eyes; no inhibitions; no rules
This significantly "Gamed the System" that was put in place to protect Investors from fraud
Fraudulent Securitization Process Video [transcription]
STEP 3: BUY OFF Ratings Agencies: Get AAA-Ratings on Securities PRIOR to
funding the Loans that should have been in the Securities at time of sale
Normally loans are made first, then pooled, then rated as a Security, then sold to Investors.
These Securities were created first, rated without Loans, sold to Investors, then filled with bad Loans designed to fail.
STEP 4: Commit Insurance FRAUD: over-insure the Securities' Values by 30x,
then specifically design the loans to fail
Insurance was paid to Servicers managing the Securities, not Investors, when the values declined
Ex: AIG credit-default-swaps were used as Insurance for these Securities
These Securities were then filled with Loans "designed to fail" to ensure values would decline
Ex: when a $300,000 loan defaulted, payout is $9,000,000 to the Servicers
STEP 5: CHEAT Investors' out of Collateral: do not assign Loans to the Securities
after the Loans are made
Loans funded with Investor money were not assigned to the Securities the Investors purchased
Using MERS allows Bank Servicers to change Loan ownership as they choose
Our Loans are Foreclosure Proof?
STEP 6: CHEAT the IRS with a tax dodge: set up Securities as Closed-end
Long-Term qualifying Investments
Use Securities as Open-end Short-term Collateral for large cash deposits (REPOs)
Using MERS to shift Loan ownership at will, allows Bank Servicers to keep up this game
STEP 7: CHEAT Truth-in-Lending Laws (TIL) 1: At Loan funding, Banks lied,
calling themselves Lenders, but they weren't (Banks are Pretender Lenders)
Money for the Loans came from pre-selling the Securities to Investors
No Bank money has EVER funded any of these securitized loans
Banks only SERVICE these loans and manipulate Loan ownership using MERS
STEP 8: Criminally Disregard TIL 2: pushed Borrowers into Loans Banks KNEW
borrowers could not afford when the Loan reset
This is criminal disregard of the Fiduciary Responsibility required of loan officers
Banks pushed loan officers with every ruse and bonus possible to snag unsuspecting Borrowers regardless of future harm to the Borrower.
STEP 9: CHEAT the Borrowers: create Loans designed to fail on schedule
STEP 11: Fraudulently Foreclose Loan defaults: falsify Loan ownership;
Example: "NINJA" Loan requirements: no documentation, no income, no job (huh??)
Loan $300,000, 6% teaser interest rate for 2 years; 16% interest rate on month 25 (failure month)
6% teaser rate for 24 months = $1,500/m Interest Only payments for 2 years (affordable)
Month 25: Loan payment "explodes" to $4,000/m (16%/12 x $300,000) and Borrower defaults
STEP 10: STEAL the Investors' Money: example below (both = $48,000/yr)
$300,000 Loan at 16% interest = 6% interest on $800,000 Investment
$300,000 of $800,000 Investment is used to fund the $300,000 Loan in Step 9.
$500,000 balance of Investment is used for Reserves, Bonuses, and Kick-backs
Reserves: $60,000 for 24 mths difference between $4,000/m due minus $1,500/m Borrower pmts
Bonuses, Kick-backs: $440,000 to loan brokers and bank servicers, other insiders
falsify Foreclosure documents
"Pretender Lenders" (Banks) foreclose as if they own the Loans; they do NOT own the Loans
Loan Servicers (Banks) illegally assign Loans to Securities years after these Funds Closed (robosigning fraud not slipups)
60 Min: Fraudulent Foreclosure Docs Video
The REMICs have Failed
Robosigning Website Proof
List of robo-signer names used in foreclosure documents
STEP 12: CHEAT the US Taxpayer: Use TARP to pay off lawsuits;
get money to do Loan Mods Bank Servicers can't legally make
Pretender Lenders (Banks) are Servicers with NO authority to modify these loans
Only Loan Owners can modify the Loans.
Since Loans were not assigned to specific Securities, Investors don't own the Loans either.
Confuse and obfuscate to the max to achieve affordable "settlements" with Fed and States