January 30, 2011

The MERS Wave Function and Corporatism (Conclusion)

Filed under: Corporatism, Land Reform, Sovereignty and Constitution — Tags: , — Russ @ 5:46 am


Parts one and two.
So what’s the actual mechanism of this MERS wave, and how are the courts finding that this isn’t the metaphorical equivalent of a physics experiment, and MERS and the banks cannot just choose to collapse the wave of potentiality into particulate actuality at a time and place of their choosing?
What does MERS claim to think it is? If we didn’t know better, we might think they were simply confused.

Although critics have provided a number of arguments against MERS, the most fundamental relate to MERS’ claim that it acts as mortgagee of record. While the language it uses to register mortgages in the name of MERS in local courthouses says it is both the nominee for the mortgagee and the mortgagee (a legal impossibility), in depositions its executives have repeatedly said that MERS is the mortgagee.

1. As Yves says, it’s impossible to be both lienholder and nominee for the lienholder. [That reminds me of a sovereignty solecism, but I’ll save that line of thought for another post.]
2. Where pressed, MERS claims to be the actual lienholder, but this is impossible without the note. Plus, MERS itself has admitted that it’s not a creditor nor a servicer, and we know it’s not a trustee, so how can it be a lienholder?
At any rate, in the 45 states where the mortgage is just an appendage of the note, it’s impossible to legally foreclose without holding the note.
Here’s more from Naked Capitalism on why nominee status doesn’t work.

The finesse that MERS has tried to use, when challenged, is that it is a nominee. But in most states, the real party in interest has to be the plaintiff, a mere nominee can’t take legal action without the real party in interest (in this case, the note owner) also joining the action. Moreover, a nominee is a party authorized to act on behalf of another party. But there is no evidence, no paper trail to demonstrate that MERS is authorized to act on behalf of the trust, nothing contemplated in the pooling and servicing agreement that governs the securitization, no fees paid by the trustee to MERS, no agreement, etc.

3. In most states, the nominee can’t be a plaintiff; only the “real party of interest” can be. The nominee cannot take this action on its own. (How can a mere registry be a nominee anyway?)
4. No documentation establishes that MERS even is the actual nominee for the trust. Just as with all the other forms of paperwork, this is mere pseudo-paperwork trumped up after the fact.
I attribute the inconsistency between the two quotes (one saying MERS under pressure calls itself the nominee, the other that it calls itself the lienholder) to the chronology. The latter is from August, prior to when this started snowballing, while the former is from November and refers to subsequent MERS depositions. Evidently MERS decided to change its story about what it really is.

The Supreme Court of Maine:
Mortgage Electronic Registration Systems, Inc. v. Saunders, No. 09-640, 2010 WL 3168374, (Me. August 12, 2010) The Court explains that the only rights conveyed to MERS in either the Saunders’ mortgage or the corresponding promissory note are bare legal title to the property for the sole purpose of recording the mortgage and the corresponding right to record the mortgage with the Registry of Deeds. This comports with the limited role of a nominee. A nominee is a “person designated to act in place of another, usu[ally] in a very limited way,” or a “party who holds bare legal title for the benefit of others or who receives and distributes funds for the benefit of others.” Black’s Law Dictionary 1149 (9th ed. 2009).

Also, according to the PSAs MERS can never hold the note, which is required in at least 45 states. The whole notion that the lienholder (which therefore legally and according to the PSA has to be the trust) can authorize MERS to take the note and act upon it is part of their illegal obfuscation plan. But they sure want the MBS investors to take that BS at face value and not ask questions about it.

The latest of these court decisions came down in California on May 20, 2010, in a bankruptcy case called In re Walker, Case no. 10-21656-E–11. The court held that MERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank could not collect on its claim. The judge opined:

Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.

The nominee doesn’t have the note and therefore cannot foreclose. The trustee legally and contractually has to hold the note. No one can separate the lien from the note. If MERS is nominee for the holders of liens where it doesn’t hold the note, it has no standing. There’s no such thing as nominee for a note holder at all.
For all these reasons MERS can never be the note holder for anything that’s supposed to be in a trust, and therefore also can neither meaningfully hold the lien nor act upon it nor meaningfully be nominee on behalf of the lien holder.
So existentially the MERS wave has to remain merely a set of bogus potentialities. Since they claimed to be everything, we reply that they are nothing. Being nothing, they can do nothing.
Does the actual mechanism of MERS have a different character? Not at all!

We have been advised that the named plaintiff in the foreclosure action should be both the record holder of the mortgage and the owner and holder of the promissory note. This is typically considered to be the servicer because if the promissory note is endorsed in blank and the servicer has physical custody of the note, the servicer will technically be the note holder as well as the record mortgage holder. By virtue of having its employees become certifying officers of MERS, there can be an in-house transfer of possession of the note so that MERS is considered the note holder for purposes of foreclosing the loan. Therefore, MERS is both the mortgage holder and the note holder as nominee for the current servicer. Page 62

That from MERS’ own pseudo-legal gibberish. The gist is that to achieve this omnipotential status they start out with only a smeared out wave of potential “employees” among all the MERS member entities. When they want to collapse the wave somewhere and actually become a lien holder or note holder or nominee or whatnot, the plan was to simply deputize an actual employee at wherever the note was* as a fraudulent “MERS certifying officer”.
[*The fact that the note also wasn’t there but had to be fraudulently vouched for by robosigners was just another layer of the fraud.]
How can Joe Lackey, officer of the servicer, hand over the note to Joe Lackey, officer of MERS?
1. How does this work according to all sorts of contracts and elements of tax status? Can you instantly deputize any random passerby as a corporate officer empowered to exercise responsibility according to pre-existing corporate contracts? Can one person have this bifurcated persona as two completely different officers? What about conflicts of interest? I suppose the MERS boilerplate language purported to cover all this. The “savvy investor” and genius borrower are assumed to have understood every bit of this and fully consented to it.
2. This is meant to obscure the fact that the note was never conveyed to the trust. MERS is supposed to be able to collapse at will into the role of nominee for anyone from servicer to trustee. But presumably the intentionally generated confusion here is supposed to let the MBS seller try to represent to the investors that MERS forecloses on behalf of the trust while in court it may be arguing something different.
3. Often the exact same fictive officer vouches for both the note and the loss of the note. (Never mind that the signatures often don’t match.) That’s so the MBS seller won’t be caught not having properly conveyed the note.
4. The whole MERS concept here is invalid according to the PSAs and REMIC (real estate mortgage investment conduit) tax status, as well as legal foreclosure procedure.

As a practical matter, the incoherence of MERS’ legal position is exacerbated by a corporate structure that is so unorthodox as to arguably be considered fraudulent….MERSCORP simply farms out the MERS, Inc. identity to employees of mortgage servicers, originators, debt collectors, and foreclosure law firms. Instead, MERS invites financial companies to enter names of their own employees into a MERS webpage which then automatically regurgitates boilerplate “corporate resolutions” that purport to name the employees of other companies as “certifying officers” of MERS. These certifying officers also take job titles from MERS stylizing themselves as either assistant secretaries or vice presidents of the MERS, rather than the company that actually employs them. These employees of the servicers, debt collectors, and law firms sign documents pretending to be vice presidents or assistant secretaries of MERS, Inc. even though neither MERSCORP, Inc. nor MERS, Inc. pays any compensation or provides benefits to them… MERS even sells its corporate seal to non-employees on its internet web page for $25.00 each.

It’s simply impersonation. It’s like using a fake ID you manufactured yourself. (And selling them to others.)
(I wrote about other malign implications of this “employment” model here.)
Yet between these fraudulent deputizations and the undocumented electronic handshakes on the registry, MERS thought it had found a way to play an infinite shell game with the notes and the status of parties.

Earlier cases focused on the inability of MERS to produce a promissory note or assignment establishing that it was entitled to relief, but most courts have considered this a mere procedural defect and continue to look the other way on MERS’ technical lack of standing to sue. The more recent cases, however, are looking at something more serious. If MERS is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue. In MERS v. Nebraska Department of Banking and Finance, MERS insisted that it had no actionable interest in title, and the court agreed.

In my first post I compared all this to the wave function collapse in quantum theory. So let’s review the way these crooks have made waves, and how we must stanch them.
A. The legal fact: A nominee has only limited powers and cannot assign or foreclose.
They say: MERS can be either the nominee or the actual holder, at the scam’s convenience.
We reply, turning this right side up: MERS is neither, and can do nothing.
B. Whether MERS were a nominee or the actual lien holder, only real MERS officers could take action. But MERS has no employees.
They say: Anyone we choose to deputize is momentarily a real corporate officer.
Right side up: MERS has no officers, and therefore no particular person can act as a MERS officer.
C. MERS wants to collapse the wave at the exact point necessary to foreclose, while remaining opaque to the investor and the public.
Right side up: The banksters broke the chain of title, and therefore no one can foreclose.
This one way prerogative to dictate the wave function collapse is universal in corporatism and the globalization organizations. Everywhere, in every detail, the goal is for the corporate actor to have zero responsibility, zero accountability, total rights, total prerogative, and not even an actual existence except at precise times and places of its choosing. At all other times and all other places it’s to be just a smeared out wave of irresponsibility and nothingness. Corporatism wants to achieve a literal Utopia, which means “no place”. Corporate Utopia is to be a no place from which nothing arises but precision assaults. But there’s to be no way to penetrate it, since other than those specific assaults, nothing “exists”.
The Germans have a term of great ambiguity, Vogelfrei. Nietzsche named a set of poems “Songs of Prince Vogelfrei”. It means literally “free as a bird”, and can be used to denote freedom. But it’s also the term that was used for medieval outlawry. The outlaw was free as a bird in the eyes of the law and could be killed on sight.
We can see how the corporations want to be outlaws in all the prerogative senses even as they still claim the protections of the law wherever convenient. And they want to turn the law into an instrument of oppression on their behalf.
So the right and responsibility of the people is clear. We must collapse all these waves at the spot demanded by our constitution and our humanity. That means we must enforce total accountability of all corporations while stripping them of all rights, since corporations never legitimately had any but strictly delimited rights, and they’ve proven they can’t be trusted with those. The corporations have forfeit all right to exist. Meanwhile the criminals who tried to shelter themselves behind these fraudulent pseudo-legal and anti-sovereign structures must be dragged into the light to face human justice for their crimes.
Since they chose to become outlaws, we must consent to their choice. But we can certainly turn this outlawry right side up. They wanted to be the kind of outlaw who retains his rights. But an outlaw has chosen to forfeit all rights. Being civilized, we the people shall overlook this and still give them their rights, most of all their right to justice for all. 
They also chose to forfeit responsibility, as their most profound act. But no one can forfeit responsibility, and here we the people have no choice. We have no choice but to enforce this responsibility, since it’s the same thing as the right to justice. Again, civilization promises to give everyone his rights, and therefore we must force the corporate criminals to live up to their civilized responsibilities.
That’s far more than these barbarians will ever give us to the extent they have the power to destroy civilization.
So the prescription is clear. Corporations are barbaric psychopaths and must be eradicated. As for the Land Scandal itself, since there’s no one who can legitimately foreclose, the mortgages revert to unsecured loans. Whether or not anyone chooses to keep paying some allegedly legitimate servicer is, I suppose, a matter of one’s subjective sense of what’s right. But I’d say that since the banksters are waging war on the country and have already stolen tens of trillions of dollars with no end in sight, and seek to destroy democracy and civil society in themselves; and since none of us even knows if the entity to which we send the payment is the right recipient; and since under the incipient Depression the banks have inflicted upon us none of us can be sure of our financial futures; putting all that together I suggest that people should consider renouncing the mortgages and keeping the houses.
If enough people choose to collapse their particular waves in that way, it would surge to a tsunami which would wash away the banks forever. 


  1. Great explanation and analogy.

    I’m wondering if this sentence:

    “How can Joe Lackey, officer of the servicer, hand over the note to Joe Lackey, officer of MERS?”

    might read better as:

    “How can Joe Lackey, officer of the servicer, pretend to be Joe Lackey, officer of MERS, in order to convey the note to his real employer, the servicer?”
    Can anyone explain the process of conveyance of moneys surrounding a foreclosed mortgage? All articles imply that the defaulted mortgages are ‘on the banks’ books’, and that the banks (or servicers, in their capacity via the PSA) foreclose. But do the banks/servicers pay the purported Trusts the proceeds of the foreclosure sales? We heard in Ibanez and other case that the deeds are generally conveyed to the banks after the foreclosure sale. Then we hear no further. But if the Trusts supposedly owned the mortgages, why are the deeds transferred to the foreclosing banks, and since the banks invariably acquire title via a ‘credit bid’ at the foreclosure auction, then where’s the money? Do the banks ever convey any money into the Trusts that is reflective of proceeds of a foreclosure sale? Or do they simply credit all of the amounts to themselves as payments for servicer fees? If the servicers had been continuing to make monthly advances into theTrusts throughout the default period, until foreclosure, do they take back that money out of the Trust, by deducting it from the sale ‘proceeds’? But if all they did at foreclosure sale was to ‘credit bid’ then how do they account for the money? And, eventually, when the bank sells the foreclosed house that they acquired via credit bid, who keeps the money?

    By googling names of some entities that have been acquiring REOs at rock-bottom prices ($3,000-$10,000) across the country, it seems that the banks and Fannie & Freddie are dumping them in large lots. One might say they are fencing them to get rid of the evidence. To me this means that the houses were pawns in a scheme that results in the taxpayers funneling payoffs on defaulted mortgages, at par, through the now-taxpayer-owned GSEs. Again, one wonders whether these par payoffs wind up as reimbursement to the trusts, or as bank bonuses?

    So, the servicers force people into foreclosure, keeping the Trusts in the dark by continuing to make monthly advances, then, instead of trying to sell the foreclosed homes for the highest price, they merely ‘credit-bid’ on them, then create a deed in their own name (not always, I’ve read of cases where even the next buyer doesn’t record a deed either), then fob the homes off for four figures to what may actually be a subsidiary, which then sells the homes to unwitting people looking to get a cheap house, or flip them yet again, not realizing that the title chain is broken, and that they are buying stolen property.

    This is why I’d like to read an article that fully explains the process that follows the foreclosures, because I think this would make it clear that the banks’ processes are the same as fencing stolen property.

    Comment by AR — January 30, 2011 @ 11:23 am

    • You may be right about that improved wording about Mr. Lackey.

      Those are great questions, and I haven’t seen much on that stuff either.

      I have read that the servicers seek to recoup the advances from the trust.

      As for putting the proceeds of a foreclosure sale into the trust, don’t they substitute an allegedly sound loan instead? Otherwise, wouldn’t the trust become gradually depleted by attrition? I don’t really know, but I know I read something about a formalized substitution process.

      Regarding Ibanez, I’ll have to go back to make sure, but I thought it involved conveying the liens after the foreclosure case had been brought, but not before its conclusion and the sale.

      I have no doubt that Fannie and Freddie are running the kind of scam you describe. They’ll probably flip houses the way the guys in “Goodfellas” were flipping TVs for as long as they can, but in the end the goal is for all the land to end up as REO, the way Hudson accuses.

      I haven’t seen a comprehensive article like the one you describe, but I’ll let you know if I do.

      You should ask Yves those questions. I don’t recall her writing a post dedicated to it, but I’m sure she could.

      Comment by Russ — January 30, 2011 @ 11:39 am

      • Ibanez began as essentially a quiet title action, to clean up the fact that the foreclosure was done before USBank recorded title, perhaps in the hopes of setting a precedent. I think they did this hoping a sleepy Land Court judge would rubber-stamp without noticing the discrepancies. They could easily have sold the Ibanez house and no one would have been the wiser. They had apparently already flipped this same house prior to Ibanez buying it, passing it through a middleman “real estate investor by the name of Knaggs Wilkenson.” I’ll paste my notes & quotes from the Marie McDonnell amicus brief:

        McDonnell next refers the Court’s attention to the Official Records maintained by the Assessor’s Office for the City of Springfield.
        specifically the Sales/Ownership History that shows what happened to the Ibanez property after U.S. Bank foreclosed.

        Ibanez acquired 20 Crosby Street on December 2, 2005 from a real estate investor by the name of Knaggs Wilkenson who had purchased the property from U.S. Bank National Association fourteen (14) months earlier for the sum of $ 35,000.00.

        One (1) year later, lbanez paid Wilkenson $115,000.00 and spent approximately $20,000.00 of his own money improving the property.

        Appellant U.S. Bank foreclosed on July 5, 2007 and on May 23, 2008 recorded its foreclosure deed which indicated it paid $94,350.00 at the sale.

        On December 15, 2008, Appellant U.S. Bank sold the property to Blue Spruce Entities LLC for $0.00; in a simultaneous transaction, Blue Spruce Entities LLC sold the property to HomeSolutions Properties LLC for $5,500.00.

        These facts raise serious questions about why Appellant U.S. Bank would pay $94,350.00 at auction for the Ibanez property and sell it for $0.00.

        Typically, the acquisition price for a foreclosing mortgagee is a bookkeeping entry, not a cash payment. The fact that Appellant U.S. Bank could give away the Ibanez property for no consideration whatsoever suggests that it may have lacked a pecuniary interest in the Ibanez loan to begin with.

        This raises the question of whether Appellant U.S. Bank had standing to institute the original foreclosure action because it apparently would not have suffered any damages if it never collected what was alleged to be owed by the borrower Ibanez.


        That part about giving away the house after the $94,350 ‘bookkeeping entry’ is so creepy. I googled Blue Spruce and HomeSolutions to find what I referred to above. Their role seems to be as fences. An article (I didn’t bookmark) about one of them stated that it had purchased several houses from Fannie and flipped them without ever recording title in its own name.
        “Substituting an allegedly sound loan”

        That’s one possibility, and a reason for only using zip codes, as mentioned in The Greatest Trade Ever wrt John Paulson’s hissy fit, quoted in Yve’s 10/8/10 post. I’d love to find out how they worked the shuffling in and out and the CDS as MBS’s collapsed. How do they roll-up a failed MBS? At what percentage of defaults do they shut it down? Or are they all still supposedly extant, in limbo? I bet the statute of limitations will manage to expire on all of this, as courts, legislatures and ‘commissions’ dawdle.

        “Hudson accuses”… is that in Monster? I haven’t read the FDL Book Salon yet. What does he say about after all the houses are REO? What’s the endgame? Frightening.
        Well, we started our onions this week. Have to plan the garden soon. Hard to think about it with 10″ of snow on the ground.

        Comment by AR — January 30, 2011 @ 2:57 pm

      • Thanks for the notes. It’s amazing how many layers of crime there are, and all for the sake of – what? I’ve barely seen even trickle-down arguments for why securtitization should have existed in the first place.

        I haven’t read Monster and didn’t read the book salon yet. But it seems like every Hudson piece nowadays leads up to the idea that the banks want to use the funny money, while it still has value, and their various predator positions amid the collapsing economy they themselves intentionally collapsed, to achieve a total monopoly of real assets like land.

        Great to hear about the onions. I need to start planning the garden too.

        Comment by Russ — January 31, 2011 @ 6:56 am

      • Re: Hudson

        I think you’re talking about Michael the economist, whereas I mistakenly thought you meant Michael W., author of <i.The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America–and Spawned a Global Crisis.

        I read the Book Salon, and he doesn’t seem to have looked beyond origination and ‘securitization’: the front end.

        I’ll have to go to MH’s site and read some more, though Christopher Peterson made it clear that it’s a land grab when he said to the House Judiciary Committee’s ‘Foreclosed Justice’, Panel 2 12/15/10 hearing: “History teaches that sooner or later the powerful folks in a country try to come and take away all of the land.”

        Comment by AR — January 31, 2011 @ 7:56 am

      • I didn’t know there were so many Michael Hudsons. I found another one yesterday who writes about Middle East issues.

        But I vaguely heard of “Michael Hudson, author of new book Monster about the banks”, and I assumed it was the same Hudson who analyzes neoliberalism and the banks’ place within it so well.

        Comment by Russ — January 31, 2011 @ 9:30 am

  2. In my first post I compared all this to the wave function collapse in quantum theory. So let’s review the way these crooks have made waves, and how we must stanch them.

    As we say in Chicagoland, don’t make waves.

    MERS even sells its corporate seal to non-employees on its internet web page for $25.00 each.

    It’s simply impersonation.

    Does it even rise to that level. It reads more like a comedy monologue.

    We are so screwed, unless we act. Time to Walk Like an Egyptian.

    Comment by Andy Lewis — January 31, 2011 @ 3:19 am

    • It could be a black comedy if it weren’t really happening.

      Walk Like an Egyptian is right.

      Comment by Russ — January 31, 2011 @ 6:57 am

  3. My brain feels like it’s on fire every time I read something about MERS, so I’m only very slowly coming to understand what this all means. From the perspective of the banks, I don’t understand the MERS architecture at all. Why not just convey the note to the trust, and have the trust foreclose for you? Or hell, actually convey the note to MERS? I don’t understand what the benefit of having this quantum company which pops into existence to foreclose in the name of someone else is, really. I understand what you’re saying about smearing out responsibility, but it seems that the banks would be unassailable by a direct regulatory assault (because they are their own regulators), but they’ve made themselves vulnerable using this almost childishly ridiculous legal ploy.. for what? And if this most obviously illegal part of the scheme has finally been detected, doesn’t that mean the gig is up, in some way? Have they actually accumulated so much wealth that they think they can insulate themselves from what’s going to happen when people figure out none of their mortgages are worth anything? Or have they simply wildly miscalculated?

    Comment by paper mac — February 1, 2011 @ 1:05 am

    • I’m still trying to figure it out, but here’s how I see it:

      The problem with conveying the note to the trust when it comes time to foreclose is that that’s too late according to the terms of the PSA as well as REMIC tax status. Both stipulate that the note had to go into the trust within a finite time, I forget how long (a few months, I think). If that didn’t happen, then the MBS would be rendered fraudulent at best, and the trustees may be liable for extreme tax penalties.

      So that’s why they want to avoid explicitly conveying the note when it’s too late to do so. That would formally admit that the terms of the trust were never fulfilled, and the trust was illegitimate, perhaps nullified. The consequences for all those toxic assets on those bogus bank balance sheets could be cataclysmic.

      I don’t think they’re worried as much about the IRS. As you say, they calculate that they can muscle their way through most of this. But if the investors were to start suing in sufficient numbers, and there are enough judges out there who take the law seriously, that could bring disaster.

      So I think that’s why the set-up was made as obfuscatory as possible. They wanted to figure out a way to isolate the context in which the note and lien had any discrete position at all (i.e., at the time of foreclosure), while from any other perspective the location and chronology remained opaque.

      This was to be done with lost note affidavits, since that way they could try to bluff their way through with cloudy paperwork without the trust actually having to forge allonges on the note. The trust could just assert that the note was properly conveyed but produce nothing but these vague assertions. That’s the purpose the “electronic handshakes” were supposed to serve.

      (As we’ve seen, though, there was plenty of direct forgery as well; part of what’s bringing the system down is how incompetent and slipshod the criminals were. This isn’t the “sloppiness” meme, but rather to say that in the execution of premeditated crimes, the criminals were sloppy.)

      Comment by Russ — February 1, 2011 @ 5:59 am

  4. Here’s my musings/questions that I was mulling to myself yesterday. Mostly questions. Maybe we can crowd-source some logic into this?
    Listing the mortgages on an MBS loan schedule by zip code, and looking at the Google Earth maps of the most heavily foreclosed cities/towns, makes it clear how easy it is to vacuum up all of the foreclosures unto the foreclosing banks. Any time a mortgage defaults, fabricate the docs necessary to foreclose. No need to even ‘switch’ the mortgage with another in the MBS, since there are always more mortgages in any given zip code. There may never have been any need to keep track of any mortgage payments, since the remittance reports, we now learn [ABAlert], were apparently fictitious. All they had to do was make up a spread sheet for each MBS and the remittances it would receive, and keep remitting. The servicers just went about collecting payments and cranking out defaults, then foreclosing. They wouldn’t really know which entity to put on the foreclosure documents, since there was never any real MBS into which any one mortgage was ever conveyed. So they could just make up whichever MBS they would use for foreclosing purposes (when they weren’t just using MERS, or the servicer, or even a totally unrelated name, such as a bank, but not its servicing unit). No doubt some quants were determining which MBS to manipulate into CDS payoffs, regardless of any fictitious performances of supposed loans, and just switching real defaulting loans into whichever MBS they were manipulating into a payoff at any given time. This is why they had to keep remitting until foreclosure, because it was impossible to keep track of when mortgagors actually stopped paying, since none of the mortgages resided in any of the MBS.

    So there are two things going on. Making money from CDS, and acquiring millions of stolen properties as REOs. We never hear about the second part of the operation. One aspect of that that’s easy to ‘get’ is that F&F are paying the banks at par for many defaulted mortgages. But what about the final disposition of the properties? There is evidence that they are being dumped for four figures onto fly-by-night outfits that then double or triple the purchase price (to $15,000 to $30,000) and unload them quickly to the few remaining buyers out there, which would have to be fools who think they can still make money on real estate. But these homes pass through this process without having proper chain of title. This means that the banks don’t really want to own these REOs, but have to dump them after getting paid off by F&F.
    Imagine that the MBS remittances are totally separate from the loan servicing operation. There’s a program that has a pre-determined MBS performance history, with all remittances worked out in advance and followed until the CDS triggers according to the predetermined schedule, and the eventual roll-up of the MBS. Each pretend mortgage in the MBS has an assigned made-up payment history and zip code.

    LPS’ Mortgage Servicing Program software is undoubtedly used for all of this. As needed, to parallel the MBS history, in real time, servicer software forces mortgages with the appropriate zip code and payment history into default and foreclosure. The exact details of the payment history are fudged, but based on mothly payment amount. Perhaps the originators or securitizers were given a menu of loan amounts and monthly payment and escrow amounts, such that there would be many mortgages with the same numbers, or close enough to fudge.

    OTOH, is it really necessary to coordinate what happens between the real mortgages and the fictitious MBS at all? Why can’t they be entirely separate, especially since we know that many mortgages were sold multiple times into many MBS? Since the investors’ money would have to be used for the remittances, it doesn’t really matter how the doppelganger underlying mortgages perform at all.

    Since we know that the foreclosures are done entirely with fabricated documentation, and apparently the banks themselves collect on the F&F payouts, as well as selling the homes at foreclosure sale, or keeping those it credit-bids and holding them as REOs, then it’s probably true that the servicing and foreclosing are an entirely separate operation from the fictitious MBS, which is probably run by a secret shop, using the investors’ cash to run that operation.
    All that talk of having to expedite the foreclosures ‘in order to clear the market’ makes no sense in the face of the reality that the banks and F&F are dumping the houses in lots for four figures to outfits like Blue Spruce and HomeSolutions. Or walking away from rustbelt houses (after already intimidating the owners into abandoning them). The real reason had to be so that the banks could receive their payouts from F&F. Propping up housing prices serves the purpose of propping up the scam longer, so that the players can cash out before it all collapses.

    I have to figure out the part about how the mortgage servicing rights being handshaked around works. And how two separate servicers can try to foreclose on the same mortgage without realizing that they can’t both actually be receiving (or not receiving) the owner’s payments. I guess the servicer who had been receiving the payments institutes foreclosure, and somehow during the default period the MSR gets handshaked to another servicer, after foreclosure filing had already occured, and no one notifies the first servicer’s foreclosure mill to withdraw the case? Then the second servicer commences a new foreclosure action. The only reason I can think of for these frequent handshaked MSRs is so that the loans appear to belong to particular MBS with which the servicer has a PSA. Do the MBS switch their PSA contracts from servicer to servicer also? LPS must be making these mistakes.

    OTOH, Joshua Holland writes* that “loans change hands a lot – they were assigned and reassigned from investor to investor, and a servicer dealt with the homeowners.” How can the loans be assigned around if the REMICs require that they NOT be switched in or out after the closing date? How can a writer like Holland so casually toss that one out there without backing up and questioning how that is even legal, and whether that shuffling of loans renders them as unsecured debt, since the notes are apparently separated from the mortgage, or at least renders the REMICs null. Of course we know that the loans (notes or mortgges) were never, themselves assigned in this process, but rather just the MSRs were handshaked around. So one must question why all the shuffling of MSRs?
    In 2006-7, when they were cranking out the total dreck so that the CDOs could be made expressly for betting on the defaults, clearly they must have known that the bubble couldn’t last much longer, and that borrowers would NOT be able to refinance for another round. So they had to know (if they’re even possessed of fully functioning prefrontal cortices) that the bubble would burst under the weight of millions of foreclosures, and that this would affect the entire economy. Are they really so juvenile that they think Daddy Fed would bail them out and there would be no international dire ripple effects? Are they so totally selfish and unconcerned about global economics, so insulated from reality that they think their own personal wealth can protect them from the consequences to the rest of society?
    I’m positive that the reason for the cover-up is inextricably entwined with the banks’ demonstrated ability to crash the system otherwise. And I believe the banks’ cash-out of the economy is due to the end of growth, and debt, as declining energy ends the system anyway. Most may not realize this, and be in denial. But I believe that those at the highest levels (CFR, Bilderberg) are fully aware of peak oil.
    How does a CDO receive payments base on the underlying mortgages? Where does the cash come from. Since it’s known from the start that the CDO is only a bet on the mortgage pool in the MBS upon which it’s based (forget for the moment that the MBS itself is a fiction), where do the remittances come from in a synthetic CDO?

    Comment by AR — February 1, 2011 @ 8:38 am

    • That’s a fantastic analysis, AR. I’ll have to reread it a few times to take it all in.

      I don’t know how accurate all the details are, but I agree completely on your basic analysis, that the prospect of Peak Oil was one of the main motives for neoliberalism in the first place, and that looting through the GSEs is probably the main mechanism (in the US) to gather in “ownership” of the land.

      (One thing’s for sure – if people still remain mired in the landed propertarian ideology, that’ll be a major self-hobbling in the attempt to take back the country itself.)

      Comment by Russ — February 1, 2011 @ 11:11 am

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

%d bloggers like this: