Volatility

January 14, 2016

Adapting the Populist Lecture Series for Today’s Food Sovereignty

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Here’s some basic information about 19th century public and farmer education through public lecture programs, as conducted by the Grange and especially the Populist Farmers’ Alliance movement. I’d like to contribute to building a new movement to rebuild community food and agriculture, and abolish corporate agriculture, organized in a way similar to the Populists. We’d have the advantage of trying to build outside the commodity system, rather than being in a race against time to reform it from inside, which is what ultimately undid the Populists.
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For a great book on the history and handbook for true democratic organization, see Lawrence Goodwyn’s The Populist Moment.
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Once upon a time I thought of adapting this idea to what I called the land scandal involving systematic property fraud on the part of the big banks. Did you know that, strictly speaking, most alleged bank-owned residential real estate is arguably not really owned by the banks at all, but rather their claim is an imposture? In 2009-10 many bloggers and commentators thought this fact, if effectively propagated, could become a major political theme. Well, that never happened, and it seems like the whole idea fizzled out. Probably both too “fringey”-seeming, even though legally it’s true, and too abstruse to boot. I ended up moving on from the idea to the more down-to-earth matter of food. Of course there’s plenty of policy mysticism here as well, such as patents, which I’ll soon be discussing in depth. That’s why I’ve long referred to the FIRES sector, adding “Seeds” (i.e. intellectual property in them) to Finance, Insurance, Real Estate. And of course corporate agriculture is more than the physical phenomena of land-grabbing and poison. Under the neoliberal globalization regime it’s also a sham campaign trying to reify fictive numbers – commodity pricing, profit, GDP, trade balance, “growth” in the biotech, agricultural, food, and finance sectors – and induce worship of these, or at least surrender to their domination. One of the greatest evils of corporate rule (the most mystical, bizarre fiction of all is that of the corporate person) is how it has made our literal bread hostage to the insane rule of these pure fictions and superstitions. We intuitively know a few basic principles for the counterattack – all commodification of food and critical natural resources is illegitimate, there can be no patents on life, and a “corporation” cannot own or control land, especially farmland. My background writing about Wall Street will come in handy for all these elements.
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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. 

January 29, 2011

The MERS Wave Function (2 of 3)

Filed under: Corporatism, Land Reform, Law, Sovereignty and Constitution — Tags: , — Russ @ 7:28 am

 

For a long time to come, the curve of protest against the banks is likely to be longer and more ponderous than the exhilarating street protests in Egypt. But protest in the form of subversion and rejection of the land model enforced by the banksters, including relentless educational work and exposure of the Land Scandal, will eventually bring us by strange paths toward the same end goal. The real goal in both cases, however consciously conceived at the outset, has to be economic transformation. Otherwise nothing avails, and we end up right back where we started, having wasted energy and lost time. In the case of the banks, we should be fully aware by now of their worthlessness and incorrigible criminality and will to tyranny. They cannot be rehabilitated. They’re tyrannically insane and can only be eradicated completely and permanently.
 
In the first part of this post I described an intellectual framework for social counteraction. Just as the banks, through devices like MERS, have set up a process whereby they exercise the prerogative to exist only in whatever time, place, and form they unilaterally choose, so we must turn this right side up and impose existence, and eventually non-existence, upon them in a time, place, and form of our choosing. They want their word to become flesh at whatever point is convenient for the corporate interest. We must declare and then enforce whatever reality achieves the public interest outcome.
 
What proves that this is the right road? All power resides in the people. All sovereignty resides in the people. The Constitution is derived from We the People. Since the people can never contemplate their own destruction, enslavement, or harm, it follows that the Constitution always seeks the public’s well-being. So if we have formally bizarre entities, dubious at best from the Constitution’s perspective, and often clearly odious; and these entities freely chose to define themselves in an ambiguous way; then it follows that the Constitution always chooses the definition and the perspective which is most beneficial to the people.
 
If in any case this perspective is the one most harmful to the criminals (and it almost always will be), that’s as it should be. That’s the genius of the sovereign people.
 
In this case, we have one of history’s most vast and malign criminal scams playing out. To review:
 
1. The basic con of securitization was to fraudulently sell MBS to gullible investors, advertising them as being of higher grade then they really were.
 
2. This was combined with the parallel fraud of selling overpriced loans to home buyers under the false pretense that housing prices and wages would permanently rise, so the borrower would definitely be able to afford the mortgage until he decided to sell the house, at which point he’d collect the accrued equity.
 
3. But right from the start the banksters knew they were systematically destroying American jobs and driving down American wages. The borrowers themselves were the banksters’ targets for this liquidation. And they knew a permanent housing bubble was absurd.
 
So both of the fundamental premises on which these mortgages were sold were lies. Most or all mortgages that have been sold since the late 90s were fraudulently induced.
 
That’s in addition to more conventional predatory lending practices. The government and the MSM hyped the scam relentlessly, since they too wanted the bubble to (temporarily) succeed. (I suppose some in the government and media were stupid enough to actually believe the hype.)
 
4. The plan was then to bundle these mortgages into securities, slice them into tranches of differing nominal quality, pool them in trusts, and sell them to investors.
 
The notes were supposed to be promptly conveyed to the trusts as per the Pooling and Servicing Agreements (PSAs). The PSAs were set up according to NY state trust law in order to earn favorable tax treatment and reassure investors of how failsafe the process was.
 
But the sellers never actually intended to convey the notes as promised. When they failed to properly convey the notes, this rendered the securities fraudulent and the trusts null and void. All those toxic assets on the banks’ balance sheets have always actually been worse than fiscally toxic – they’re completely nonexistent, legally. 
 
The reason the banks failed to convey the notes was because they knew that somewhere down the line the loans would start to default. They wanted to maintain the freedom to assign the mortgages to the trust only as they defaulted. That way they could manage which tranches took the hits, and how well their CDS bets against their own MBS products would pay off.
 
That’s one example of how they wanted total licence to collapse the wave function at will. The contents of the trusts were smeared out as a wave for as long as the incidence of default was smeared out. As soon as a particular loan defaulted, its loss was then supposed to be assigned to the most expendable tranche of the most expendable trust.
 
That’s also why, as we saw with the farcical documentation the banks submitted in the Ibanez case, PSA loan schedules are prone to be vague about their actual contents, for example listing only a zip code and town but not a borrower name or street address. The former information is noncommittal enough to let the bank be flexible in retroactively assigning the defaulted loan; the latter would forestall this flexibility.
 
5. As an ancillary crime, they also wanted to evade all the taxes and recording fees to which they’d be liable as the notes kept changing hands along the chain of title.
 
6. And since the banksters anticipated that the bubble would burst and it would come time to foreclose on millions of homes, they needed to be able to obscure the fact that the notes were never properly conveyed. They needed to be able to foreclose without it being evident that the notes had never been conveyed to the trusts, and that whoever was foreclosing usually had no legal right to do so at all.
 
To solve the problems of 4, 5, and 6, the criminals engineered MERS. This electronic registry has been compared variously to EBay, Craigslist, or Wikipedia, but with far less transparency or oversight than these. This chaos was by design. MERS’ purpose was to send all information about the notes and liens down a rabbit hole where no one had any authority or accountability. MERS “members” would simply type in whatever words they chose. They’d conclude “electronic handshakes”, as MERS put it. There was never any requirement or confirmation audit to vouch for the reality of any of the alleged transactions. It was simply an “electronic phone book” which, by some “legal pretzel logic”, was alleged to be authoritative when MERS would appear in court to foreclose. (Fannie and Freddie tried to enshrine this by institutionalizing MERS as Original Mortgagee (MOM) language in their own documents.) Only at this moment of the banks’ choosing was MERS supposed to collapse the wave function and miraculously retrieve the information from its black hole of opacity, that Yes, this trust owns this loan and has the right to foreclose. The fact that no note could be produced, and no chain of title conveyance established according to the law, was supposed to be ignored. Robo-signed “lost note affidavits”, thousands and eventually millions of them, would invade the courts. MERS would lawlessly assert the bank prerogative, hopefully the ignorant and hapless debtor wouldn’t fight back, and the judge would roll over if necessary. Responsibility was to disintegrate completely, while corporate prerogative was to have total license.
 
That was the plan.
 
But something went wrong with this perfect crime. Victims of foreclosure, only a few at first, did ask questions. They fought back. And they started finding judges who weren’t so impressed with the banksters’ Galtian grandeur. Sure enough, the first moment a smart and self-respecting homeowner challenged the banks’ foreclosure system and found a conscientious judge to look at the evidence, the whole thing came crashing down.
 
In the final part I’ll detail how the MERS scam is unravelling. I’ll just leave off for now with one obvious conclusion the courts have come to: Since the MERS registry is nothing but shady characters talking about what they allegedly did or plan to do, usually with no supporting evidence, the California courts have found that testimony from MERS in itself is nothing but hearsay:
 

RULES OF EVIDENCE – A PRACTICAL PROBLEM

This structure also possesses practical evidentiary problems where the party asserting a right to foreclose must be able to show a default. Once again, Judge Bufford has addressed this issue. At In re Vargas, 396 B.R. at 517-19. Judge Bufford made a finding that the witness called to testify as to debt and default was incompetent. All the witness could testify was that he had looked at the MERS computerized records. The witness was unable to satisfy the requirements of the Federal Rules of Evidence, particularly Rule 803, as applied to computerized records in the Ninth Circuit. See id. at 517-20. The low level employee could really only testify that the MERS screen shot he reviewed reflected a default. That really is not much in the way of evidence, and not nearly enough to get around the hearsay rule.

 
That’s the reality, as different courts in different ways are concluding. We’re beginning to drive MERS from the courts like driving thugs from the streets. And without the MERS fig leaf to conceal them, the banks will find it impossible either to establish any right to foreclose at all, or else to do so without laying bare the fact that the MBS trusts are void and the MBS themselves nothing but fraudulently sold unsecured paper.
 
If we can force this wave function collapse upon the banks, who knows how devastating it may be to them. It may lead to their destruction. And it may give us the political and even legal pivot point we need to start taking back the land itself.

January 23, 2011

Who Will Dictate the Wave’s Collapse? (MERS, the Land Scandal, Corporatism Itself)

Filed under: Corporatism, Land Reform — Tags: — Russ @ 2:28 am

 

I’ve used the metaphor of Schrodinger’s cat to describe the function of the MERS system within the general Land Scandal. Another way of putting this according to Schrodinger’s terminology is the “collapse of the wave function”. This means, in its basics, that the pre-observation existence of an electron is smeared out as a potentiality over several possible orbits around the nucleus, as a wave. Only when it’s actually subject to observation does the electron wave “collapse” to a particle with a discrete orbit.
 
This has obvious metaphorical application to the Land Scandal. What have the banksters and MERS wrought here? They wanted to smear out in principle all ownership status and the actual location of the note, so that the bank-wave function could collapse wherever MERS and the banks chose in any particular case, while to outside eyes there would be nothing visible but the quivering cloud of obscurity. This was part of a monumental criminal program to defraud investors and then society as a whole of trillions.
 
It’s also exemplary of the core program of corporatism itself, which is to absolve corporations of all responsibilities and liabilities while empowering them with infinite rights. A favorite tactic, both within particular corporations and among an array of them, is to smear out accountability so that it’s impossible for an outsider seeking audit or relief to receive a response (he can’t cause the wave to collapse in any meaningful way) while the corporate cabal unilaterally collapses the wave at whatever point it chooses to exercise a prerogative.
 
I’ve compared this to asymmetrical warfare, whose essence is for the conventionally weaker party to concentrate at points of its choosing, strike the stronger enemy at a weak point, and disperse before the bigger, slower enemy can respond. Although by now it seems strange to say it, corporations are still the weak, unconventional force. They are an insurgency. We the people can smash them the moment we choose to redeem our freedom and prosperity. But they wage effective guerrilla warfare on the pseudo-legal and propaganda fronts. The government assists them in striking our weak points – for example, systematically committing foreclosure fraud to steal from people who aren’t likely to understand how to fight back and who have been successfully demonized as “deadbeats”. The inertial mass lumbers or sits while the assault gradually encompasses it. If all goes well for corporatism, by the time we realize that the prospective deadbeat is all of us, that we’re all in the banksters’ targeting, it’ll be too late.
 
The specific Scandal we’re talking about these days is how, now that anyone other than themselves is closely observing this wave function, we find that the banksters themselves made it so that it’s often impossible, going by their own rigged law, to figure out who has the right to foreclose.
 
So the correct social response to this is clear. We must turn it right side up. We must forcible collapse the wave function in any particular case wherever is most beneficial to society. This is the banksters’ own chosen ambiguity. They unilaterally set up this ambiguity, as part of a crime against the people. Therefore the people have the right and the duty to clarify it to our own benefit and right. Therefore, what if according to the bankster system no one can establish who has the note or the “lost” note (robo-signing doesn’t cut it)? If we cannot figure out who has the right to foreclose? In that case, the right to foreclose may exist in the abstract, but no one in particular could ever exercise it. They set it up as its own smeared out wave, so they would be able to collapse that wave any place they wanted. But if we go according to the law, it may be that they’re unable to collapse it anywhere. No one in particular would be able to cause that wave function to collapse. The house, now unforecloseable, would be liberated from the banks completely. And the banks brought that upon themselves. If this process, already taking place in scattered individual cases, could become universal through our refusal to continue paying mortgage debt to illicit recipients, we could smash the banks and take a big step toward redeeming the land.
 

 

In part two I’ll describe in detail how the great crime was carried out, from the fraudulent inducement of tens of millions of mortgage loans all the way to the intentional crashing of the economy in 2008 and subsequent Bailout, with particular reference to MERS’ critical role within the structure.

January 13, 2011

Objectively Pro-Bank “Efficiency”

 

Where people are strong fighters within an area of competence, I try not to focus on lapses where they range beyond that competence. So this post isn’t meant to attack these people, but nevertheless I want to highlight a problem endemic to all reformist types.
 
We know that we can’t reform Wall Street, and we can’t reform corporate rackets in general. They’ve proven themselves to be incorrigible and irredeemable. They’ve proven that their entire vector is toward total destruction of everything other than their own wealth and power, and that in the end they’ll destroy that as well:
 

Then every thing includes itself in power,
Power into will, will into appetite;
And appetite, an universal wolf,
So doubly seconded with will and power,
Must make perforce an universal prey,
And last eat up himself.

 
They are literally totalitarian. History proves that reformism never accomplished anything but a brief respite until the siege was again laid. It’s a permanent war of attrition until the final tyranny is laid upon us. Or until the final extirpation of the rackets themselves. Citizenship cannot coexist with them, democracy cannot coexist with them, humanity cannot coexist with them. All these must perish; or else the corporate rackets must perish.
 
So it’s no use to still dream of benevolent growth and tamed finance sectors. There has been no growth in decades, only ponzi schemes, and financialization has done nothing but run these schemes while it steals all real wealth and destroys all real productivity. Any “solution” which implicitly or explicitly contemplates such revivals of things which never existed in the first place is no policy at all. Yet the reformists, no matter how cogent they are in the attack, always regress to this tepid delusion the moment it comes to prescriptions.
 
This can be overlooked where the fantasies are harmless. But these false solutions are often themselves malevolent.
 
If Foreclosuregate is half as important as it threatens to be, then this mortgage crisis is also a great opportunity. (For once that hackneyed citation is precise.) It offers nothing less than a way to smash the banks once and for all, if we can prevent the government extending its Bailout to such an extremity of lawlessness and unconstitutionality as to retroactively legalize the monumental frauds involved in mortgage lending and securitization. It promises to bankrupt the banks once and for all, while putting the land dispensation itself into political play. The possibilities are dazzling.
 
But some of our erstwhile “reformers” don’t see it this way. What we ought to see as a spellbinding vista refulgent with the rising light of a soon-to-become-visible new sun, causes them to tremble in fear. So they’ve been running home to momma. Home to big government, home to big banks, home to the same criminal system they claim to oppose.
 
In all of this, one of the few things we have going for us is the fact that real estate law is a state and local matter, and that this system of law is based on procedures of recording which look archaic to today’s economic and political hipsters of every stripe, but which simply are the embodiment of resiliency, sustainability, stability. We the citizens of America are absolutely blessed that this is the indelible law which the banks have no choice but to frontally assault. It promises to be a benediction, if we make it such.
 
But alas, the likes of Marcy Kaptur (of “show the note” fame), Randall Wray (who wrote such a great piece on fundamental criminality of the MERS system), and Matt Taibbi don’t want this benediction. They side with Wall Street on this one.
 
Instead, they all advocate the centralization and concentration of the land recording system, under the federal government. They use the Orwellian euphemism “modernization” for this. We can therefore see their fundamental contempt for true federalism, and for the proposition that the only progressive path is toward direct democracy and economic self-determination. No, they still want trickle-down tyranny. They just still tediously cling to the absurd delusion of a benevolent despot.
 
Thus Kaptur proposed a bill which contains one excellent element:
 

In response to this mess, Representative Marcy Kaptur (Ohio) is going to introduce legislation to prohibit Fannie and Freddie from buying new mortgages that are registered in MERS. Since there is virtually no activity in mortgage markets save what Fannie and Freddie are doing, this would effectively take away all new business from MERS.

 
But wants to counteract this blow to the banks by replacing the nominally private MERS database with a central government version of MERS:
 

Further, her legislation would direct HUD to study the creation of a federal land title system to replace MERS while protecting rights of state and local governments. This is a sensible solution that would modernize the recording and tracking of property ownership.

 
 
Similarly, Taibbi offers his policy wish list:
 

Preventing bad foreclosures is great, but I’m pretty sure they need to come up with some sort of legislative solution to a) properly compensate the investors in the MBS who are usually the true owners of the mortgage b) negotiate new payment schedules so that homeowners who win these applications don’t feel like squatters but legitimate owners c) preserves as much as possible the credit scores of the homeowners in question, and d) create a modern registry system that does make sense, that both compensates the state for taxes and makes sales of mortgages efficient. I don’t think they can do this through the courts; we’re going to need a federal law that creates a logical procedure for dealing with the bad mortgages from the bubble period, an amnesty or a federal review or something. The problem is, of course, is that any move to legally change the status of these mortgages would affect the value of all these mortgage-backed instruments still floating around, which would leave these banks more or less instantly bankrupt, which would set the stage for another round of bailouts. If this decision means the banks have to take a big loss, they’ll find a way somehow to put that bite back onto the taxpayer.

 
These commenters all reject the concept of a federal bill legalizing MERS itself. But they dream of simply maintaining the same bank-run database, just nominally under the federal government. How to square this contradiction? I guess it’s just the big government, process liberal mindset. Evidently we see these people evincing the Peter Principle.
 
But by now we know that big government liberalism was only a feature of the ascending oil age. We know that big government is always objectively pro-racket. (Centralized communism simply handed over the system to a single racket, the Communist Party.) Post Peak Oil, centralized government will never be anything but a thug. So by definition solutions have to be truly federalist and head in the direction of exercising power and management at their proper constitutional level, directly democratic among the assembled citizens themselves.
 
As for the resiliency and alleged “inefficiency” of the crotchety old land recordation system, let’s be 100% clear that from our practical and democratic point of view, resiliency is efficient. Redundancy is efficient. Sustainability is efficient. Inefficiency is efficient. As with everything else, so we must always ask: Efficient or inefficient for whom?
 
We’ll find that what’s inefficient for the system is usually good for the people.
 
We can take it as axiomatic: What’s inefficient from Wall Street’s point of view is a boon to us. It’s something we must cherish, cultivate, nurture.
 
But to remain mired in the process mindset which is unable to contextualize anything or look at ultimate outcomes only ends up driving even the fiercest subjective critic of Wall Street back into what’s objectively a pro-Wall Street position. That’s what we see in these examples.
 
The legal framework for recording deeds is fine as it is. For the federal government to usurp it would be unconstitutional and a crime.
 
Shouldn’t the fact that the banksters hate the existing system and find it so impossible to comply with be the strongest proof of that system’s soundness?  

October 26, 2010

The Corporatism of MERS

Filed under: Corporatism, Land Reform — Tags: — Russ @ 3:54 am

 

Taken in itself, MERS is just a lesser moving part of the big mechanism of the Foreclosuregate Land Scandal. It’s a malfunctioning gear, not the ghost in the machine. The most important features are the break in the chain of ownership, leaving the liens homeless and vagrant, and the vagrancy of the securities in the MBS trusts. In both cases we seem to be left with nothing but unsecured paper. The MBS themselves are worthless, and neither kind of paper directly touches the house. All of this has been propped up in the eyes of the law by massive, systematic forgery and perjury. The culpable conspiracy to commit fraud must encompass all officers of every entity involved, right up to the CEOs of BofA, Wells, Citi, and JPM. (Goldman Sachs and Morgan Stanley as well, since they knew how the MBS scam worked.)
 
MERS is just an electronic registry set up to secretively toss around “ownership” in the form of virtual ones and zeroes but not in the form of the physical paper required for it to have any force of law. This was intended to render the conveyor belt from originator to trust and servicer to investor more “efficient”, meaning cheaper in labor and tax evasion. It was also helpful in tranche fraud, since rather than the mortgages actually being sliced and diced ahead of time, the computer waited until one went bad and then assigned it to the proper tranche so the favored gamblers wouldn’t take the hit. The system was like a million Schrodinger’s cat boxes where people bet on how many cats were dead, except that the connected players were tipped off whenever a cat died and always got to avoid those boxes.
 
Nearly a year ago I wrote about this, and I think my description and assessment hold up pretty well:
 

But at the very center of the financial system, out of its own logic and procedure, it has grown a tumor. This is the system’s failure to maintain its own registry, its own paper trail, its own legal basis. It’s as if they already burned many of the deeds for us.

The people are already outraged at the crimes of the banks. We can join to this moral and political outrage an understanding of the structural anarchy and illegality of the system in itself. According to its own premise it has no legal basis, even a phony one, because the land ownership premise is that whoever holds the note has the right, so if there’s no note, there’s no right.

This philosophical and moral combination could provide the basis for a real reform movement. The goal is not just to take back the country from the banksters, but to restore the rule of law and order itself.

So let’s be clear: To be a revolutionary today is to be the advocate of law, while to defend the status quo is to be a lawless rioter.

Property ownership, duly recorded and registered, is the foundation of this legal system. Anarchy at this point equals anarchy throughout. You sell a property, you transfer the written deed. The legal owner, the piece of paper in hand. This has allowed for the orderly ranking and disposal of any claims on the property. Adjudication is not supposed to get hopelessly entangled right at the outset, in even figuring out who holds the note.

But the housing bubble’s fuel was a vast supply of mortgage loans passed along a conveyor belt of entities – lender, sponsor, depositor, trust – while being sliced and diced into tranche layers to then be securitized. Apparently the paperwork and fees and taxes payable at each transfer were too much for the banks to deal with so they simply set up their own extralegal system where any of the shell firms along the way could at any time be what the bank’s computer would call the “owner” (meanwhile the piece of paper often simply disappeared).

The banks (Citi, BofA, JPM, Wells), the Mortgage Bankers Association (MBA), Fannie and Freddie, the street-level sleazy lenders and servicers and others set up the Mortgage Electronic Registration System (MERS) as a front to carry out foreclosures and serve as the respondent in any court case. MERS simply claims to own the mortgage if anyone asks. It doesn’t really even “exist” in the sense of having many employees, etc. Where action is necessary an employee of the underlying bank, servicer or whatnot doubles as the MERS cadre.

For convenience sake, and to cheat on fees and taxes, they simply blew off centuries of property law, the rule of law as such. The result of all this is a system of accounting fraud and avoidance of legal responsibility in general. Anyone who has to deal with them, especially who tries to fight back, has to play Whack-A-Mole with this crazy bureaucracy where no one in particular has any responsibility, authority, or ability to do anything. It takes faceless, bloodless limited liability, the zero responsibility-total rights ideology, to the extreme.

Most ridiculous, the note itself often disappears. Demands to produce it lead to MERS or some similar shell simply vouching for itself, “I own it”, with zero proof.

 
While MERS is not the essence but a tool, it is symbolic of the corporate phenomenon – the disembodied claim to total rights, the relinquishing of all responsibility, shifting of all costs, the assumption of all prerogative, the essence of might makes right.
 
In a sense MERS is a totem of corporatism, and a taboo for humanity. Even for ardent propertarians like Hernando de Soto, MERS is a monster to be feared and loathed. MERS flouts, assaults, or subverts several of the criteria de Soto listed for stability of property rights – that registries be accessible to the public, that they take all externalities into account, that deals be “firmly tethered to the real value of the asset from which it originated” (MERS systematically orphaned the lien), and that opacity and obfuscation be purged from the system.
 
The anti-MERS ruling of the Kansas supreme court made a joke about it:
 

“The relationship that MERS has to Sovereign [Bank] is more akin to that of a straw man than to a party possessing all the rights given a buyer… What meaning is this court to attach to MERS’s designation as nominee for Millennia [Mortgage Corp.]? The parties appear to have defined the word in much the same way that the blind men of Indian legend described an elephant — their description depended on which part they were touching at any given time. Counsel for Sovereign stated to the trial court that MERS holds the mortgage ‘in street name, if you will, and our client the bank and other banks transfer these mortgages and rely on MERS to provide them with notice of foreclosures and what not.’ ” (Landmark National Bank v. Boyd A. Kesler)

 
It was oddly appropriate that in 1997 the MERS CEO proclaimed, “Yes, there is life on MERS.” This was false, but it does capture the sense of the MERS corporation itself as a sterile rock floating through a dead void.
 
There’s something horrible about this:
 

On April 7, 2010, in the Superior Court of New Jersey, MERS Treasurer and Secretary William C. Hultman gave an oral sworn video/telephone deposition in the case of Bank Of New York v. Ukpe.:

Q Do the assistant secretaries — first off, are
you a salaried employee of MERS?
A No.

Q Are you a salaried employee of MERS Corp,
Inc.?
A Yes.

Q Are any of the employees of MERS, Inc.
salaried employees?
A I don’t understand your question.

Q Does anyone get a paycheck, if they are an
employee of MERS, Inc., do they get a paycheck from
Mercer, Inc.?
A There is no MERS, Inc.

Q I thought, sir, there’s a company that was
formed January 1, 1999, Mortgage Electronic Registration
Systems, Inc. Does it have paid employees?
A No, it does not.

Q Does it have employees?
A No.

Q Does MERS have any employees?
A Did they ever have any? I couldn’t hear you.

Q Does MERS have any employees currently?
A No.

Q In the last five years has MERS had any
employees?
A No.

Q How many assistant secretaries have you
appointed pursuant to the April 9, 1998 resolution; how
many assistant secretaries of MERS have you appointed?
A I don’t know that number.

Q Approximately?
A I wouldn’t even begin to be able to tell you
right now.

Q Is it in the thousands?
A Yes.

Q Have you been doing this all around the
country in every state in the country?
A Yes.

Q And all these officers I understand are unpaid
officers of MERS?
A Yes.

Q And there’s no live person who is an employee
of MERS that they report to, is that correct, who is an employee?
A There are no employees of MERS.

 
It’s not just run-of-the-mill crookedness (let alone “sloppiness”.) There’s something horrible about how they strive to make this corporation a truly humanless entity. Their concept was that whenever they wanted, MERS was to have “standing” in court, stand as “owner” of the land. Yet not only is it a “corporate person”, but it claims to have no human persons as employees. Whenever they needed an actual person to stand in for the corporate entity they’d deputize someone from one of the other entities such as the servicer.
 
This is the trend of all corporations. Wherever possible, as per the Rule of Rackets (the capitalist-to-oligopolist imperative and prerogative), the goal is to become a “brand” and delegate all the actual work, if any, to subcontractors. This is also intended to “legally” put buffers between the corporation and its responsibility for anything at all, for example using something close to slave labor. (See Naomi Klein, No Logo.) Or, as in our mortgage conveyor belt example, to buffer the originator, i.e. a big bank or subsidiary thereof, from legal liability for the bogus quality of its mortgage loans when that same bank later stands as trustee for the MBS derived from them. The bank’s liability is supposed to have been laundered in both directions through the conveyor process. MERS facilitated this.
 
MERS is also used to illegally assign mortgages after an originator had gone bankrupt, when only the bankruptcy trustee could have such authority. But this crime would regularly be committed, whenever the trust belatedly needed such an assignment. The system’s opacity was intended to cover this up. 
 
It would stand to “own” the land wherever a foreclosure was to take place. This is the logic of separating useful work on the land (the original kernel of the ultimately fraudulent labor theory of property itself) from legal ownership. Todau we reach the point where temporarily unwanted land can be consigned to humanless corporate “ownership”. This is the better to relinquish responsibility for maintaining the foreclosed land and paying property taxes on it until the next buyer is found. Beleaguered towns and cities, facing fiscal disaster and whole neighborhoods falling into neglected semi-vacancy and the squalor that follows, have had great trouble trying to find out who really “owns” these vacant, unmaintained houses. (The same trouble the individual foreclosee often has.)
 
These phenomena describe the full logic of corporate personhood. The goal is for none of us human beings to have any legal rights vs. the corporation, but for it to have total rights vs. us. The goal is for none of us to be “employees” of the corporate entity, but just deputized laborers. Have you seen the impoverished day laborers who stand in a parking lot waiting for some guy to come around in a pickup truck? The goal is for all workplaces to become like that in essence, just piling into the pickup truck. (That is, for the diminishing number of us who’ll have a job at all.) You’ll get your meager pay, but beyond that you won’t exist, in the eyes of either the corporation or the law, as a human being. You’ll be a deputized cog at work, and outside work you simply won’t exist at all, other than as a criminal.
 
It’s chillingly redolent of the phenomenon described in Arendt’s Origins of Totalitarianism, where the stateless person had no legal existence unless he committed a crime. The only difference is that in the mass refugee situations Arendt was describing she claimed that the stateless unperson could actually improve his condition by committing a crime and in that way becoming a legal person. I doubt that’s likely to be true under corporatism where the system aggressively criminalizes poverty itself.
 
Today the whole mortgage conveyor system totters, calling into profound question both the legal and market validity of securitization as well as the legal disposition of the residential land itself. The system will try to retroactively legalize the mess, but the hurdles it faces are daunting. If it’s possible to hold the line vs. MERS and this system of fraud, could the rest be rolled back from there? Many commenters are saying this threatens to bring us back to September 2008. We should be saying, is that a threat or a promise? Could this actually give us a second chance to do what we should have done two years ago? Could this derail the Bailout and bring about the destruction of Wall Street itself?
 
And from there, could we find ways to invigorate other battlefronts with the same primal sense of outrage people are now feeling where it comes to their very own homes? In this case, as I said in my Jubilation post, “the political street entered the house”. But how do we find other such avenues, to the point that we can get Americans out of the houses and into the streets?

October 13, 2010

The Land Scandal and Blurring Legal/Political Terrain

Filed under: American Revolution, Land Reform, Law — Tags: , — Russ @ 3:01 am

 

Although on its surface the Land Scandal is a legal scandal, it’s really a manifestation of the political war now raging in America. MERS, faulty or neglected transmission of title, fraudulent trusts and securitizations, perjured affidavits, forged documents, illegal claimants, fraudulent conveyances from bankruptcies, kangaroo courts……sum these up and locate them in the overall context of normalized organized crime, and we have not the use and abuse of the law, but the complete overthrow of law. And now that these crimes are coming to light, the criminals will attempt a “political” solution (which is really anti-political; kleptocratic pseudo-democracy is actually the death of politics). The government will try to accomplish this political fix. Any attempt to fight back, to impose the rule of law, must itself be a political struggle.
 
This is a hybrid legal/political terrain, and therefore calls for hybrid tactics and a hybrid moral sense. It has no clear boundaries and no predictable strong points. We see how the system wants to legalize and/or politically normalize all fraud and ownership uncertainties, and beyond that all the obscenities of an economy, a “society”, a (dis)order founded on monopolies of crime. To prop up their crumbling wealth and power, to “fix” all the crises, from technical glitches to fundamental legal abdications like losing the chain of title to profound political dilemmas like sustaining permanent mass unemployment, they’re going to probe every point they can, looking for places to break out of the ever-tightening encirclements of the forces they’ve conjured against them.
 
This is no longer a legal process where any significant power base is actually reverent toward the law, nor can a new citizen base build itself starting with the law. The existing law is irreparably corrupted and broken. Legal technicalities are now tools, weapons, or obstacles. That’s the way all elites think and act, especially those in the FIRE sector. To try to fight back with reverence toward the same law which has already been rigged in favor of America’s enemies, who themselves will only ever abide even by their own rigged law to the extent it’s convenient for them, is to hobble oneself tremendously from the outset. And we already face long odds.
 
If we look at the series of legal derelictions and crimes, we see how the rule of law has been overturned even in the technical sense. This is now a political issue and an economic crisis (which reinforces the political aspect, since economic crisis always threatens political crisis).
 
Over what did the banks preside?
 
1. They weren’t punctilious about transferring the note. (Not to mention fraud in writing many of the subprime mortgages in the first place.)
 
2. Nor about keeping the note and lien together as you have to in 45 states to maintain the unity of the secured mortgage.
 
3. Nor about putting the note in the securitization trust.
 
4. Nor about informing buyers of the MBS that the notes hadn’t been properly deposited in the trust. (Not to mention the rampant lies about the proportion of subprime loans, often ones that were calculated to fail, in these securities.)
 
5. Once they had to answer questions in court, they started out by lying about accidentally losing or destroying the note, claiming it was an isolated incident.
 
6. Once this was escalating, they systematically churned out fraudulent affidavits.
 
7. And they systematically forged allonges and other documents and even the notes themselves.
 
Now that this is becoming clear, the response of the administration, Wall Street, and the MSM has been to lie about it. They’ve put up a united propaganda front in order to downplay the fraud and title abdication issues and represent it as technical problems resulting from sloppiness on the part of bad apples. But the system remains secure, foreclosures are legally sound and economically healthy, the more people who get kicked out of their homes believing it’s a crime on the part of gangster banks, the sooner and surer a recovery we’ll have. (What a bizarre political argument going into an election.)
 
Meanwhile Congress rushed to try to jury-rig at least one fix, a bill to absolve some foreclosers of the necessity for forging notarizations by forcing states to accept phony electronic ones*.
 
[*It wouldn’t be Congress without a corporatist boondoggle. Probably the real impetus for the original bill was to force governments to buy proprietary stenographical machinery. Just another patent tollbooth through which a parasite wants to force us all to pass. We can’t have stenographers using non-proprietary work methods, oh no!
 
At first I didn’t understand the stupid story the bill’s sponsor told about how “stenographers among my constituents complained about how it’s hard to do their jobs, and they need federal relief”, but now I get it.
 
These “stenographers” were really corporate lobbyists, perhaps illegal unlicensed ones.
 
It’s crystal clear that this government, for as long as it continues to exist, will never again undertake any policy except for the purpose of setting up more rent-seeking corporate tollbooths.]
 
If and when the bill passes it still won’t go to the heart of their problem. It will just regularize some of the “irregularities” they’ve been deploying to cover up the structural problem, that they broke the chain of ownership, and that all their toxic “assets” are even more toxic than we thought.
 
They’ve been getting to work degrading the standards and otherwise muddying the picture of what the legalities really are while they try to figure out the real fix. Meanwhile propaganda pushes the Orwellian claim that their obfuscations and obscurities are really clarifications. And meanwhile the alternate route of kangaroo courts and street thugs continues.
 
(Perhaps all this is better for the citizen, however. Fewer people all the time are willing to believe the lies. More people are able to see the truth in spite of the fog.
 
So for the government to formally, but pseudo-legally, ratify the criminal status quo, to “legally” regularize what they call the legal irregularities but which everyone knows are the illegal regularities, may render the big picture more clear than ever: This is a terminal kleptocracy which can never be reformed. Our freedom, our recovered prosperity, our very lives, depend upon getting rid of it.) 
 
The way things are nowadays I assume any law that can give functionaries, including judges, cover to do the “expedient” thing is intended to have that effect. If judges take it the way they know the banks, Obama, and the Congress want them to take it – as all the legalistic pretext they need to “legalize” the whole mess – it will have that effect. At the very least, any judge who already wants to do that will take it that way. They’re already keen to normalize things even given just the existing traduced law, as we see with the dedicated kangaroo courts in Florida. They don’t need much more political encouragement.
 
So there’s where we’ll see if there’s any vitality left in the law. The goal is to bring an anti-politics into the courts to replace the law and help kill all politics in the greater society. This comes from extra-judicial political pressure, from the pseudo-legal maneuvers of Congress, and from the top down among rogue anti-constitutional courts themselves, namely the rogue SCOTUS.
 
If this is true, then we cannot build on the existing law or the existing constitutional interpretation, but will need to inaugurate our own transformational convention to reinvigorate this trampled document and renew the shattered law.
 
Meanwhile this whole affair is mind-boggling. At one end the banks have technically abrogated their ownership of the land, at the other end they’ve also stripped their MBS, the very foundation of their balance sheets, of all “value” and even legal existence.
 
While we can expect the government to do whatever it has to do to “legalize” everything, even that won’t be enough to put the Humpty Dumpty of economic confidence back together and up on the wall again.
 
The entire psychological basis of the global economy depends upon the perceived legal integrity of this paper. That integrity was ever less credible even before this SNAFU came to full light.
 
Going forward who could ever trust any of this again? Who will ever participate in any of these “markets” except to the extent he’s coerced? Who that still has some fiduciary duty could plausibly argue that he was justified putting anyone’s money into any of this? And when he’s sued, he like everyone else will have to rely on brute corruption in the courts. The courts themselves will have no choice but to plunge fully into the cesspool, since there’s no other way they’ll be able to countenance the way the executive and legislative branches are going to try to “fix” the most extreme economic crimes in history.
 
Do they have any other choice? 

September 21, 2010

The Disintegrating Mortgage Front

 

Yves Smith at Naked Capitalism continues her documentation of the mortgage system unraveling. As I’ve written about several times before, the sale and securitization system has devolved, with mortgage mills set up to evade many layers of local and state taxes while the mortgages themselves are disintegrated into a mind-boggling atom-smasher of tranches of CDOs and CDOs of CDOs. The physical note often disappears somewhere along the way. Nobody could legitimately figure out who actually owns these mortgages, in many cases. The mortgages themselves have effectively ceased to exist.
 
This reads like a satire on a land distribution system where the physical land is viewed abstractly even by those who physically squat on it and call themselves “owners” (but are really debtors). But under today’s legal system the land is really owned by the parasite finance sector.
 
But as Smith has extensively written, even according to their rigged law they’ve been abdicating this “ownership”. Legal ownership is anchored in the note. But where the note can’t be produced, as is happening more and more, no one can legitimately claim this ownership, or any right to foreclose or sell. As debtor advocates say, Always make them produce the note!
 
None of this was a problem as long as the bubble was inflating, prices were always going up and foreclosures were rare. But like with so many other things (it’s simply astounding how much lawlessness was let ride during the bubble inflation), as soon as the bubble burst everything started coming undone. There’s been an avalanche of foreclosures, which would have been hard to deal with even under circumstances where legal practice was on the up and up. But in today’s disaster there’s also the chaos of uncertain legal right for any particular actor to do anything. It seems that in many cases the foreclosing bank itself doesn’t know whether or not it actually has legal ownership and therefore any right to foreclose. Needless to say, they don’t care, and in many places the court system is looking for ways not to care as well.
 
Here’s a summation of recent developments, especially in Florida.
 
Florida is one of the states hardest hit by the collapse of the housing bubble. Everywhere underwater debtors are walking away or being foreclosed upon. It’s such a landslide that an oligopoly of three mills has been churning out foreclosure paperwork night and day. The state has called judges out of retirement to set up a special foreclosure tribunal with the proclaimed goal of processing foreclosures as fast as it can, usually without being overly diligent about the actual legality of any given foreclosure.
 
The cries of abuse and lawlessness have become so universal that state attorney general Bill McCollum, certainly not known as a friend of the people, has felt constrained to initiate an investigation of the mortgage mills.
 
Meanwhile Naked Capitalism recently divulged how big banks like Wells Fargo are trying to wash their hands of the mess they presided over by forcing buyers of foreclosed properties to absolve the bank of any responsibility in case the foreclosure turns out to have been fraudulent because the foreclosing party didn’t actually own the deed. The banks want to shift all the risk onto the buyer (the pain is of course sustained by the foreclosed debtor), and if necessary the legal blame onto a lower-level servicer.
 
In response to McCollum’s investigation, Florida congessman Alan Grayson has written a letter to the Florida supreme court asking it to suspend the operations of the quasi-legal mortgage tribunals. The state itself has acknowledged there may be a structural problem with the legality of the mortgage and foreclosure disposition, so how can the state continue to stampede the foreclosure process like this?
 
Not coincidentally, on the same day as Grayson’s letter was publicized Bloomberg reported that GMAC has suspended all foreclosures in 23 states, including all but one of the judicial recourse states. This follows upon allegations of systemic and systematic fraud on the part of GMAC officers. On its face it seems that GMAC is massively exposed to liability for fraud and is scrambling to retrench before it continues going before judges under oath. (I don’t know how the perjury system works on signed affidavits in non-judicial states, but it sounds like there’s less danger there.)
 
GMAC responded to the Bloomberg story claiming that it’s only suspending ongoing foreclosures, not halting new ones. We’ll see what that means.
 
As we see, not only is this land distribution illegitimate in both moral and practical terms. The banks in their greed and carelessness have also inadvertently abrogated their “ownership” even according to their own corrupted law. Now the system has to try to do what it does everywhere else – scramble to bail itself out, to cobble together a temporary kludge to keep itself propped up just a little while longer. So they’ll have to somehow find a way to retroactively legalize this lawlessness, or at least politically normalize lawlessness just as they’re trying to normalize permanent mass unemployment.
 
Even as it sways with greater vehemence in the rising wind, the Tower of Babel keeps being built higher, each layer more heavy than that below it. Even as they must prevent the bubble from deflating further, they must try to reflate it and keep it inflating forever. Even as they try to reflate the bubble they find its very legal basis devastated, and must try to construct a passable pseudo-law to pose as the real one. And they must do all of this as they struggle to maintain political control.
 
I hope the efforts of bloggers and rare MSM reporters like the NYT’s Gretchen Morgenson will get these stories and the truth they convey out into the public consciousness. It’ll help toward weaning people from the “ownership society” scam, one of the most pernicious scams encouraging debtors to cling to their debts, that is to the system itself, against their own interest. The HAMP scam was founded upon this goal. But eventually the entire scam must founder and fail.

December 23, 2009

Toxic

 

Our education in the complete moral failure of the system continues. Part of my program is to describe the ways in which the big banks and their government flunkies are not citizens, are not moral actors, are not members of a community. They are clinical sociopaths.
 
Today I’ll discuss bank walkaways and two phony government programs meant to pretend the Obama administration is acting in the public interest but is really acting contrary to it.
 
As we would expect, all the coverage in the mainstream media centers on individuals walking away from their mortgages. But a far more destructive practice is where the banks themselves, after foreclosing on families who are the victims either of the bank-generated downturn or of predatory lending in the first place, then turn around and abandon the property like a totalled, uninsured car.
 
They do this where the local prices are so depressed that the costs of maintaining and reselling the property would be greater than the price they could get. Sometimes they don’t even bother to foreclose, saving themselves that cost as well.
 
These abandoned properties become the “toxic titles”.
 

A mortgage holder usually walks away from a property when it decides the house has such little value that it’s not worth the money and effort required to keep it in good shape or even to foreclose on it—a common occurrence in neighborhoods already scarred by foreclosures. The borrower is gone, however, often unaware the house hasn’t been taken, Lind said. A property might sit vacant for months or even years, an easy target for vandals who strip it of plumbing fixtures, wiring, copper, or anything else of value.
Walkaways wind up with “toxic titles,’’ Lind says. The mortgage company retains a lien, or a charge, on the house, but the borrower still is considered the owner. The property sits in limbo, with the mortgage usually exceeding what it would sell for, because of its decline. If the city has to tear it down, it adds its own $8,000 to $10,000 demolition lien. Not surprisingly, potential buyers aren’t exactly lining up. Non-profit neighborhood groups that could fix up the property face long and expensive legal battles to claim it.

 
Somewhere from five to ten thousand houses in Buffalo have been abandoned by the banks. There have been greater than 14000 foreclosures in the Cleveland area since 2007, an uncertain number of these toxic. Many of them seem to have no owner at all, so far as can be ascertained from public records.
 
This systematic irresponsibility causes the further blighting of already distressed neighborhoods. The very banks being bailed out by the taxpayers turn around and assault those same taxpayers by refusing to be held accountable for this “property” they usually make such a big deal about owning.
 
(Once again we see the psychopathic total-rights-zero-responsibility ideology which has destroyed this country.)
 
“They’re just dumping their trash in the Midwest”, says Cleveland law professor Kermit Lind (who coined the term “toxic title”). The problem is expected to get much worse over the next few years, as the mortgage meltdown continues. Lind likens it to environmental racism. It is in fact a from of pollution, another negaitve externality, another socialized cost after all the profits were hoovered up privately.
 
This attempt to evade accountability is another feature of the MERS system I wrote about last week. The point of the nameless, faceless conveyor belt mortgage chop shop is to let only the cash through but never the sunlight.
 
The idea is for the bank to be able to walk away and disclaim all responsibility and even knowledge of a toxic property. It’s supposed to be as if the earth opened up and swallowed it whole along with all memory or legal record of it.
 
They want this enshrined contradiction, this all-rights/no-responsibilities whack-a-mole. They want the court to take their word for their “ownership” when they do want to foreclose and take possession, even if they can’t produce the note. But where they want to walk away, they tell the court they own nothing.
 
On the principle that we’re entitled to deal with someone on his own terms, I’d say we should demand proof of their alleged right wherever they want to exercise a right, while imposing responsibility wherever they want to walk away, based on just a reasonable supposition of that responsibility.
 
Meanwhile in Buffalo, Cleveland, and elsewhere some decent public servants are fighting back. The basic tactic is for the court to place a lien on the abandoned property, and then demand satisfaction of that lien wherever that bank wants something in any other case in the jurisdiction. The bank has no choice but to take responsibility for these properties or else give up on doing business in the city. Cleveland has also sued 21 banks for demolition costs and the additional policing costs entailed by abandoned and unmaintained properties.
 
They’d have a right to go further. Simply condemn, demolish, and make the bill part of the lien.
 
A truly creative, constructive policy would be to set up rent-to-own programs with these now city-owned houses. Or perhaps encourage squatting on a stewardship basis, with the stewardship as banked capital toward renter and eventual ownership rights.
 
This kind of policy would give people a real stake in maintaining and rebuilding the community. (Of course the great danger is that they’d entice poor people into such community work and then, once some market value had been restored to the neighborhood, sell it out from under them. So a political movement based on such ideas would have to emphasize a legal framework to prevent that.)
 
The clear message for now, even as we build such movements for ourselves, is that the big banks and their political enablers have unilaterally walked away from their civic obligations.
 
Let’s be clear. If you as the homeowner can’t afford the mortgage payments, and especially when they give you a foreclosure notice, you both can (and according to the police must) clear out, free and clear. You no longer have any moral or legal connection to the lot. The bank has an absolute obligation. As for its being underwater, didn’t it price in the risk of that in the first place?
 
They don’t believe they owe the community or the individual anything, so neither the community nor the individual owe them anything.
 
Responsibilities precede rights.
 
And what’s the administration’s role in this whole farce? The main ploy has been the HAMP scam. (Hampscam? Is that as catchy as Abscam? Do people still remember Abscam? Seems pretty tame by today’s standards.)
 
The propaganda of the Home Affordable Mortgage Program (HAMP) was that distressed borrowers could apply for temporary mortgage modifications which could then be converted into permanent mods. It was supposed to help 3-4 million mortgage holders.
 
As per standard corporatist practice, the program was voluntary but included lots of supposed incentives for the banks to participate.
 
So what’s the result been? More than 750000 trial mods have been initiated, but only 31000 have been made permanent. Information is scarce because transparency was also made voluntary, and participants have simply gone for secrecy.
 
Meanwhile millions who dream of staying in their homes have applied for the program and continue to pay premiums they can’t afford based on the implicit promise that they’ll get a permanent mod. The administration and the banks keep promising this in theory, yet keep coming up with excuses for why the permanency conversion rate is so low.
 
The banks and government flacks keep claiming that the applicants don’t send in the requisite paperwork, or that it somehow got “lost” in the process, but housing activists think this is a campaign of intentional obstruction.
 
Then there are the many cases where the bank explicitly lies, notifying the applicant of his pending permanentization, only to foreclose anyway.
 
Often the foreclosure comes as a complete and terrifying surprise, since the Treasury Department itself wrote into the program application that the applicant waives all notification rights. Once you’re in the program, the bank can foreclose immediately, at will, not matter what lies it’s told you.
 
So we have the anemic numbers, the endless obstructionism, the clear bad faith on the administration’s part in how the thing was conceived in the first place, the banks’ being allowed to lie with impunity.
 
We have the way it was conceived as a purely voluntary program, with special incentives for participation. Never mind that the participants are the insolvent, bailed out banks we the people now OWN, such that they no longer have any right to do anything other than what’s in the public interest.
 
We have the way the politically embarrassed Obama is now reduced to begging the banks to do some little bit to help make him not look like such a prostituted wimp. (And the fact that the banksters can’t help but show their absolute contempt for him, not even bothering to show up for his snivelling little lecture.)
 
When you put all this together, it’s clear that the HAMP is nothing but a scam. With active administration abetting, through the device of a temporary mod, the goal is to induce the doomed borrower to make more payments with the false implicit promise (and often the explicit fraudulent lie) that he’ll get a permanent mod.
 
(To confirm this, with administration support the Senate just voted down for the second time allowing bankruptcy judges to force cramdowns on primary mortgages. Everyone agrees this is the most effective shorter term measure, and anyone who wanted to help distressed Americans would support it. So we see where the government’s at.)
 
For one more piece of the puzzle, we can look at Obama’s alleged plan to use TARP money to support lending to small businesses.
 
The idea, announced with much fanfare in October, was to use the TARP to assist community banks and credit unions. These are the real lending institutions which create value and help generate real economic activity and jobs. Of course nowadays they’re doing poorly as Main Street gets clobbered.
 
And as we can see, this is a feature and not a bug. That’s because TARP administrators are imposing far more rigorous “viability” standards on community banks than they ever have on the big banks. While the insolvent big banks were simply dogmatically declared from the start to be solvent and worthy of bailouts, and while propaganda like the “stress tests” were used to further propagate this solvency lie, the community banks are now being held to severe standards in excess of all reason. As a result, only 26 of the 64 applicants have been approved.
 
By the same standards, none of the big banks could ever have qualified. We could never have had a TARP in the first place.
 
Which goes to demonstrate why we did have the TARP and the whole bailout in the first place. It was never to help Main Street, but rather to help loot it. It was never to save Wall Street to save Main Street, but to save Wall Street to enslave Main Street. And so it continues today.
 
All this proves what we must keep teaching for as long as the system exists: America never needed the bailout. Main Street should have been directly bolstered, while the Wall Street parasite was left to die.
 
Save-Wall-Street-to-save-Main-Street was the same old trickle-down lie, the Big Lie, and the Shock Doctrine version of the lie.
 
Government bolstering could have gone directly to community banks, credit unions, small business, decentralization and relocalization groups, and individuals.
 
But obviously this would run counter to the power interests of the system, and that’s why they lied and did the opposite.  

December 17, 2009

Mortgage Desperadoes

Filed under: Civil Disobedience, Land Reform, Law — Tags: — Russ @ 8:20 am

 

When the peasants finally take up the torches and pitckforks and drive out the wicked land baron, they rush to the courthouse to seize the registry and burn the deeds of ownership. That’s how it happens in the movies and sometimes even in real life. It’s practical and symbolic. It’s the obliteration of hated feudalism, the break with the oppressive past, the slate wiped clean and renewal of true human community with the land, where a man farms what he owns. This is real creative destruction.
 
It seems today that such things are impossible. If you assume both the power structure and the internet will exist forever (ironically both are extremely top-heavy, unresilient, vulnerable to system collapse), then you assume the paper trail, in both physical and digitized form, must be unassailable.
 
But at the very center of the financial system, out of its own logic and procedure, it has grown a tumor. This is the system’s failure to maintain its own registry, its own paper trail, its own legal basis. It’s as if they already burned many of the deeds for us.
 
The people are already outraged at the crimes of the banks. We can join to this moral and political outrage an understanding of the structural anarchy and illegality of the system in itself. According to its own premise it has no legal basis, even a phony one, because the land ownership premise is that whoever holds the note has the right, so if there’s no note, there’s no right.
 
This philosophical and moral combination could provide the basis for a real reform movement. The goal is not just to take back the country from the banksters, but to restore the rule of law and order itself.
 
So let’s be clear: To be a revolutionary today is to be the advocate of law, while to defend the status quo is to be a lawless rioter.
 
Property ownership, duly recorded and registered, is the foundation of this legal system. Anarchy at this point equals anarchy throughout. You sell a property, you transfer the written deed. The legal owner, the piece of paper in hand. This has allowed for the orderly ranking and disposal of any claims on the property. Adjudication is not supposed to get hopelessly entangled right at the outset, in even figuring out who holds the note.
 
But the housing bubble’s fuel was a vast supply of mortgage loans passed along a conveyor belt of entities – lender, sponsor, depositor, trust – while being sliced and diced into tranche layers to then be securitized. Apparently the paperwork and fees and taxes payable at each transfer were too much for the banks to deal with so they simply set up their own extralegal system where any of the shell firms along the way could at any time be what the bank’s computer would call the “owner” (meanwhile the piece of paper often simply disappeared).
 
The banks (Citi, BofA, JPM, Wells), the Mortgage Bankers Association (MBA), Fannie and Freddie, the street-level sleazy lenders and servicers and others set up the Mortgage Electronic Registration System (MERS) as a front to carry out foreclosures and serve as the respondent in any court case. MERS simply claims to own the mortgage if anyone asks. It doesn’t really even “exist” in the sense of having many employees, etc. Where action is necessary an employee of the underlying bank, servicer or whatnot doubles as the MERS cadre.
 
For convenience sake, and to cheat on fees and taxes, they simply blew off centuries of property law, the rule of law as such. The result of all this is a system of accounting fraud and avoidance of legal responsibility in general. Anyone who has to deal with them, especially who tries to fight back, has to play Whack-A-Mole with this crazy bureaucracy where no one in particular has any responsibility, authority, or ability to do anything. It takes faceless, bloodless limited liability, the zero responsibility-total rights ideology, to the extreme.
 
Most ridiculous, the note itself often disappears. Demands to produce it lead to MERS or some similar shell simply vouching for itself, “I own it”, with zero proof.
 
For too long, corporatist judges have enabled this flouting of the law. They’re trying to prop up corporate anarchy the same way the government is trying to prop up the insolvent bank system. But finally we’re seeing judges who refuse to accept this fraud on the court.
 
In October we had a state judge in Massachusetts and a federal court in New York rule that lenders who could not produce the title or prove they were the real owners could not foreclose. In the federal case the judge actually wiped out the debt itself in an attempt to punish the would-be defrauders.
 
An August ruling from the Kansas supreme court was even stronger, finding that because MERS wasn’t a properly registered owner of an underlying property, it had no legal interest. Writing for the court Judge Eric Rosen was acerbic:
 

The relationship that MERS has to Sovereign [Bank] is more akin to that of a straw man than to a party possessing all the rights given a buyer… What meaning is this court to attach to MERS’s designation as nominee for Millennia [Mortgage Corp.]? The parties appear to have defined the word in much the same way that the blind men of Indian legend described an elephant — their description depended on which part they were touching at any given time. Counsel for Sovereign stated to the trial court that MERS holds the mortgage ‘in street name, if you will, and our client the bank and other banks transfer these mortgages and rely on MERS to provide them with notice of foreclosures and what not.’ (Landmark National Bank v. Boyd A. Kesler)

 
As the NYT’s Gretchen Morgenson analyzes:
 

By letting the sale stand and by rejecting Sovereign’s argument, the lower court, in essence, rejected MERS’s business model.

Although the Kansas court’s ruling applies only to cases in its jurisdiction, foreclosure experts said it could encourage judges elsewhere to question MERS’s standing in their cases.

“It’s as if there is this massive edifice of pretense with respect to how mortgage loans have been recorded all across the country and that edifice is creaking and groaning,” said Christopher L. Peterson, a law professor at the University of Utah. “If courts are willing to say MERS doesn’t have any ownership interest in mortgage loans, that may eventually call into question the priority of liens recorded in MERS’s name, and there are millions and millions of them.”

 
Or as Yves Smith writes at Naked Capitalism:
 

But it isn’t surprising that judges are plenty unsympathetic, and in cases, outraged. The law is all about sanctity of process, both the underlying law and court proceedings. Cases typically revolve around disputes of fact or grey areas of the law. This isn’t grey (whether a party has standing to file a suit is fundamental) and the law in this area is well established. Basically, the securitization industry tried creating rules outside any established legal framework and judges are having none of it….

And we have an even more interesting set of possibilities. Say servicers and MERS fail to clean up their act, and more judges start throwing out foreclosures. Kansas Supreme Court Judge Rosen didn’t just say he didn’t see an acceptable paper trail; elements of his ruling were a much more fundamental attack on MERS. If more judges start challenging MERS’s legitimacy, that could strike at the heart of foreclosures in securitizations. In other words, a few more of these rulings may accomplish what the folks in DC have been unwilling and unable to do: force banks to negotiate. The problem, of course, is the impact will be very inconsistent. Some jurisdictions and judges will no doubt be more sympathetic to this line of argument than others.

Stay tuned, this looks certain to get even more interesting.

 
All of this has met with the standard clueless arrogance from the crooks. One plaintiff’s attorney blithely argued that the scam was “standard operating procedure for many years” and should therefore be upheld. Rosen quoted the lawyer in the Kansas case as saying MERS holds the mortgage “in street name, if you will”. No, the court would not. Another federal judge in Ohio rejected the argument before his court, calling it the “Judge, you just don’t understand how things work” defense. (Reminds me of the teenage Henry Hill in Goodfellas trying to placate some police detectives who confront him, saying repeatedly in a soothing, patronizing voice “It’s okay.” As in, this is the way we do things. Don’t you understand?)
 
But as Judge Keith Long wrote in the Massachusetts Land Court case:
 

[T]he problem the [lenders] face (the present title defect) is entirely of their own making as a result of their failure to comply with the statute and the directives in their own securitization documents… What the plaintiffs truly seek is a change in the foreclosure sale statute (G.L. c. 244, § 14), which can only come from the legislature.

 
That’s it. They were scoffing at the law, disregarding, disrespecting. If they don’t pay the taxes and fees upon taking “ownership”, not only are they criminal thieves, but how can they be the real owners? Why should government uphold any alleged right they claim?
 
Morally, philosophically it’s the radical opposite of the real basis of any economic right. Responsibilities precede rights, and rights follow from responsibilities. Corporate sociopathy is an affront to and contradiction of the basis of the human contract. We have a right to resist this aggressive anarchy.
 
Education must always hammer it home: Demand to See the Note!