By day, I’m a Realtor; by night, I drink wine and eat chocolate while writing tales from a sexy ghost called, Charles Sutton. This is a real estate story.
Joe called me the other day. He went through bankruptcy almost two years ago. In the bankruptcy court, Wells Fargo obtained permission to foreclose on his home. He feels like millions of disgruntled Americans who’ve ended up in the bankruptcy courts after soul-wrenching job losses, or those who couldn’t get their lender to give them a realistic home loan modification. Joe pretty much said, “Take my house and shove it!”
Today, eighteen months later, Wells Fargo still hasn’t foreclosed on Joe’s home. He and I got to talking. You know, Virginia, how I love to babble on about interesting happenings.
We discussed the real problem at the bottom the housing collapse—the securitization of home loans by Wall Street banksters. Home loan securitization is an ongoing process that politicians and attorneys, to a greater or lesser degree, either fail to understand or choose to ignore. The banksters designed it to baffle us all with bull shit while they raked in $billions selling home loans.
While securitization appears complex, the basics are simple. You get a home loan from, say, Fred’s Loans Inc.; in many states, your mortgage consists of a deed of trust and a promissory note, the deed of trust attaches to your house, and the note gives the terms of payment. These are two separate legal documents.
Fred then sells both the trust deed and the note to a Wall Street bank, who funnels hundreds, if not thousands, of similar home loans into a ‘loan pool.’ The next step is for that bank to sell them to a ‘Depositor,’ usually another Wall Street bank subsidiary.
Your note and deed of trust are now with a ‘Depositor,’ and should have been assigned properly from Fred’s Loans to the Wall Street bank and then to the ‘Depositor,’ showing signatures on your original note each time it was sold. A real estate note is like a check. You receive it from one party, and you can sign it over to someone else by putting your signature on the back of the check—it’s a negotiable instrument that must be dealt with as per the law called, ‘The Uniform Commercial Code.’
Then, the ‘Depositor,’ assigns all the home loans over to a specially created, ‘Trust.’ The trust then sells interests in the loans to investors. Most of these trusts were formed under the Trust Laws of the State of New York. They all have ‘cut-off,’ dates. All the loans must be assigned to the trust on or before that date.
These trusts have complex, ‘Pooling and Servicing Agreements,’ which describe what can and cannot be done by the servicing company, the company who collects your monthly mortgage payments. Every step of the process is designed to protect the trust from bankruptcy by any of the preceding parties. The trust is registered, together with a schedule of all the mortgages involved, as a mortgaged-backed security under the Federal Securities and Exchange Commission.
When home values began crashing in 2007, banks tightened lending to the point that businesses across the nation were gasping for credit. Without credit, businesses folded or down-sized and job losses began. Millions of unemployed borrowers defaulted on their mortgage payments. By 2008, mortgage servicing companies were enthusiastically foreclosing all across the country.
What many people don’t know is this: the mortgaged-backed trusts took out loan insurance. If a borrower, whose mortgage is in the trust, declares bankruptcy, the insurance kicks in and the loan is paid off. If a foreclosure happens, insurance kicks in and the loan is paid off. That’s why the Wall Street banksters wanted AIG, the huge insurance company, bailed out with taxpayer money. At $182 billion to date, it is the largest Federal bail-out in history.
Most of the trust agreements allow the servicing companies to foreclose. So, the insurance has paid off the loan and the investors are happy; the servicing company now gets to sell the foreclosed home and keep the money. In effect, they’re stealing properties on the backs of taxpayers. Why should they bother with loan modifications?
Nonetheless, some judges are stopping servicing companies from foreclosing. They are challenging the servicers to provide documents showing that the trust, which employs them, is the promissory note holder for the foreclosed property. In a growing number of cases, they cannot show that the homeowner’s promissory note bears all the correct endorsements from the loan originator through the securitization process into the trust.
In their greed to sell securitized loans as fast as possible, Wall Street banksters got sloppy with paperwork. Many notes and deeds of trust were never properly endorsed over to the trusts, and others were never even part of the trust named in a given foreclosure.
Under New York State Trust laws, nothing can be received by a trust after its legal cut-off date. During foreclosures, servicing companies have attempted to assign documents to the trusts after the fact, but any assignment of a deed of trust or a promissory note after the cut-off date is void.
Joe guesses that Wells Fargo hasn’t figured out how to legally foreclose on him yet. He noted that politicians aren’t talking about the mess made by the banksters, that they seem to be hiding it.
Then he said, “I guess it depends on who you’re going to let chew off a piece of your soul–the politicians, or the banks.”
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