rachel2w1w: foreclosure defense

Even before the Great Recession, all was not as sunny as it seemed in New York City. For the lucky minority, the boom years of the 1990s and 2000s were glorious times. As the twin forces of financial deregulation and corporate-friendly tax policies loosened the economic floodgates, Wall Street surged, lifting all yachts if not all boats. Between 1990 and 2007, average Wall Street salaries (including bonuses) ballooned nearly 112 percent, from just over $190,000 in 1990 to more than $403,000 in 2007, according to a startling new study by the Fiscal Policy Institute. During the same period, the top 5 percent of income earners—those making more than $167,400 a year in 2007—nearly doubled their share of the city’s total income, from 30 percent to 58 percent.

But for the remaining 95 percent, life was not so charmed. As unions came under assault, the minimum wage stagnated, manufacturing jobs were shipped overseas, New York’s poor and working class struggled, and its middle class wasted away. As the Fiscal Policy Institute study shows, the median hourly wage shriveled 8.6 percent between 1990 and 2007. The gap between rich and poor yawned wider—while the rich claimed ever larger chunks of the pie, the poorest 50 percent claimed less than 8 percent of the city’s annual income and the once robust middle claimed just above 34 percent, earning New York the honor of being the most unequal large city in America.

“If New York City were a nation, it would rank fifteenth worst among 134 countries with respect to income concentration, in between Chile and Honduras,” writes James Parrott, chief economist for the Fiscal Policy Institute, in his report “Grow Together or Pull Further Apart? Income Concentration Trends in New York.”

Such was the world that existed before the recession even struck, and it bore an uncanny resemblance to the Big Apple on the eve of the Great Depression, when the gap between rich and poor was epicly wide. New Deal policies helped usher in an age of unprecedented (if still relative) equality after the Depression, but it seems unlikely that the same result will come from this meltdown. In fact, it seems to be exacerbating inequality.

The reasons for this are many and tangled. They lie in the foreclosure crisis, which fell disproportionately on minorities. They lie in the fact that the hardest-hit industries—construction, manufacturing, retail trade and administrative support services—were those that employed the poor, the working classes and struggling middle. They lie in the apparent willingness of professionals and managers to slash everyone’s job but their own (Andrew Sum found no net loss in the combined number of managers and professionals employed in the country during the recession). But fundamentally, the reasons lie in policy: in a bailout that went too far and a stimulus that didn’t go far enough.

I would like the following points regarding MERS to be clear to all:

1) It’s not a PAPERWORK issue – it’s an OWNERSHIP issue. Whenever we see the word ‘paperwork’ describing the MERS scam, we should know that the correct word is ‘ownership’.

‘Paperwork’ is defined as: written or clerical work, as records or reports, forming a necessary but often a routine and secondary part of some work or job.

That is not the issue with MERS. The issue is one of fundamental ownership – which is determined by signed and recorded paper.

2) The most significant and basic nature of the MERS scam has not been discussed. It is, quite simply, that the obfuscatory nature of the MERS system allows the originating lender to sell the initial mortgage MORE THAN ONE TIME. I will demonstrate the implications with a simple example.

Now, it may never be possible to prove that the same mortgages were sold repeatedly. In fact, because of the very nature of MERS, it is likely that it would not be possible to show clear evidence. The point is, however, that by flaunting the existing, centuries-old state property laws, MERS allows for this to happen. It does not guarantee that it happened but it allows for it to happen. It may well be the real reason the chain of titles were broken and the ‘paperwork’ has all gone missing.

An example of the situation MERS allows and the financial implications:

Consider a pre-MERS/pre-securitization scenario for a real estate loan. Bank A originates a $500,000 loan. The $500,000 is used to pay the seller of the house. In exchange, Bank A will receive monthly payments for the next 30 years at (for example) 6 percent. If Bank A decides that it does not want to collect small amounts each month, then it may sell the rights to the bank that will pay them the highest price, Bank B. For whatever reason (its own belief on what constitutes a ‘good interest rate’) – Bank B may pay $525,000 for this loan. The assignment of the loan is done based on the stable, ancient property laws of the state, and Bank A has then made $25,000 profit on this transaction. Bank B then owns the loan and there is no ambiguity.

It would be hard to imagine Bank A being tempted to then sell the exact same loan to Bank C. The reason is that there is very clear evidence at the county recorder’s office that the loan was already sold to Bank B.

Now consider the same situation with the MERS system in place.

Bank A makes the same original loan for $500,000 which is used to pay the seller of the house. Now, when it is interested in selling this loan to the highest bidder, Bank A realizes that because the way things operate now (regardless of state laws), it will not be selling the loan directly to another bank (Bank B above). Instead, it has become customary for Bank A to ‘bundle’ hundreds of loans together and sell them all to ‘investors’ who are probably made up of entities such as mutual funds, city governments, foreign governments, etc. Each of these entities likely represents many people’s money – none of whom really have any idea of which individual loans they are purchasing.

Well, after all the bundling and selling to entities and stuff, it may turn out that, on average, Bank A gets $525,000 for each loan – and so in that way it made the same profit.

In this scenario it is not at all hard to imagine Bank A being tempted to sell this same loan again. Unlike before, when there was ‘Bank B’ and ‘Bank C’ and very clear records at the county recorder’s office, there is no ‘Bank B’ but only a mish-mash of bundled loans sold to investors/entities who do not know which loans they have bought — and by the way — the documents have been ‘lost’. In this scenario, it is all too tempting to sell this same loan to the securitized version of ‘Bank C’ – which is the same loan bundled with hundreds of other loans – sold to vague entities who do not know what they have really bought.

Comparing the two scenarios, one might think that Bank A has just doubled its profit. It has just sold the loan twice after all. Wrong! In the second scenario, Bank A has made more than 20 times its profit. In the original scenario, Bank A’s profit is ($525,000 – $500,000) = $25,000. Of course, if the loan is fraudulently sold a second time, then all of the $525,000 from that sale would be (illegal) profit because there would be no transfer of $500,000 to the original seller of the house, as was done with the initial loan. Therefore, Bank A’s profit would be ($25,000 + $525,000) = $550,000.

Bank A has increased its profit by 22 times simply by bundling/schmundling. Is that possible to prove? Probably not, given the destruction of so many documents and the entire system of banks/lawyers/politiicans/lobbyists, etc. But it is not necessary to prove any of this. It is only necessary to realize that the system allows for this, it encourages it, and it is likely the key driving dynamic to all we are seeing unfold. It is far more likely than the latest explanations in the media that banks “wanted to evade fees at the county recorders’ offices”.

It explains why we are where we are. The remedy, of course, is to adhere strictly to the state property laws which have been the same for centuries. These laws require clear, recorded, signed documents which do not allow the above confusion to exist. The courts must simply enforce these laws and let the chips fall where they may. If past foreclosures need to be voided, then so be it.

Fred Smith

benchcraft company scam

rachel2w1w

Thursday, February 17, 2011

foreclosure defense

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