In Prison for Taking a Liar Loan

http://www.nytimes.com/2011/03/26/business/26nocera.html?_r=1&emc=eta1

At least mortgage brokers and Wall Street executives don't go to jail for mortgage fraud.

Were Obama's own mortgage documents signed by a 'robo-signer'?

http://voices.washingtonpost.com/political-economy/2010/10/were_president_obamas_own_mort.html

To display the level of corruption built into the financial system, President Obama's own mortgage loan documents were probably fraudulent.

A consumer advocacy Web site has obtained some mortgage paperwork for President Obama and first lady Michelle Obama's home in Chicago.

The documents, which show that the couple's mortgage of $210,000 was fully paid on May 10, 2005, are signed by a Chase Home Finance vice president Marshe Craine.

The interesting thing about the documents is that Craine's signature on court documents related to other people's homes looks radically different from the version on the Obamas' paperwork. In other, unrelated cases, attorneys for homeowners have accused loan processing companies of allowing employees to forge other people's signatures.

Craine has also signed documents on behalf of Mortgage Electronic Registration Systems Inc. -- the Reston, Va.,-based company that was set up by the financial industry to help track securitized mortgages and that is being targeted in foreclosure lawsuits around the country.

A Chase spokesman declined to comment.

Financial hurricane to collapse the system

This is a concise explanation of the pending mortgage fraud crisis--and resultant collapse of the financial system.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/10/6_Norcini,_Sinclair_-_Financial_Hurricane_To_Collapse_the_System.html

“That collateralized debt obligation is now effectively worthless because the collateral behind the debt can no longer be collected. The banks cannot go and get it.

Let’s say you have 10 mortgages at $1 million a piece, the sum total of those mortgages are $10 million. So, the banks took the 10 mortgages and bundled them together into a collateralized debt obligation or CDO with a face value of $10 million.

They then sold that new entity that they created to an investment group of some sort, a pension fund, hedge fund, etc. promising them a yield of let’s say 7%. The sales pitch would emphasize the fact that this CDO was backed by real collateral. In the event of loan defaults by the borrowers, the banks would tell the buyer of the CDO that the collateral behind the loan could be sold to recapture any potential losses on the part of the purchaser.

Everything seemed to work fine until the defaults began and the foreclosure process kicked into high gear. The foreclosure process has exposed fatal flaws in the system and the flaw is that the banks cannot prove clear ownership of the mortgage.

Consequently, they are then barred from foreclosing on the property. Because they can no longer foreclose on the properties, the CDO is now effectively worthless.

The hedge funds and the pension funds cannot now sell these CDO’s on the open market, so how are they going to recover their original investment? Perhaps you may say that won’t be a problem because these instruments were insured. The problem is now the credit default swap or the insurance policy that was purchased to protect against default assumes that the insurer has the financial wherewithal or resources to make good on the claim.

If there were only a small number of these problem CDO’s this would not be an issue. But as the number of the foreclosures continue to skyrocket, and more and more banks are prohibited from seizing the collateral behind the property, the sheer magnitude of the number of claims presented to the insurer will overwhelm their balance sheet.

In effect what you have is an insurance company which doesn’t have enough money to pay off the claims. Compounding the problem is the fact that the CDO’s and credit default swaps related to these claims form a mass network of interdependence. This then ripples through the entire system and creates a domino effect which can cause the failure of entities creating the next financial crisis.

Ultimately the Federal Reserve will be asked to step in and buy up the now worthless CDO’s and put those on its balance sheet. In order to do this the Federal Reserve will have to engage in massive quantitative easing, taking onto its balance sheet the worthless CDO’s in exchange for newly issued treasuries.

Citigroup, Ally sued for racketeering

Readers should understand that under RICO laws, assets of the accused can be seized. RICO laws were enacted to prosecute organized crime syndicates.

The implication is that the mortgage-back securities and associated derivatives are worthless, as home borrowers default en masse, with no recourse. There is no collateral backing the mortgages, the collateralized debt obligations, or the credit default derivative swaps. No one knows who owns the mortgages, and hence, investors of the synthetic derivatives own worthless paper. Banks, insurers, pension funds, institutional and sovereign funds are included as investors of these toxic assets.

Yet, markets still ignore these machinations. Once reality hits, we'll see a re-run of the banking crisis of 2008, only bailouts won't be on the menu. Or will they?


http://www.bloomberg.com/news/2010-10-04/citigroup-ally-sued-by-homeowners-alleging-racketeering-over-mortgages.html

Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans.

The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

The homeowners claim the defendants filed or caused to be filed mortgages with forged signatures, filed foreclosure actions months before they acquired any legal interest in the properties and falsely claimed to own notes executed with mortgages.

The Kentucky suit claims MERS and the banks violated the Racketeer Influenced and Corrupt Organizations Act, a law originally passed to pursue organized crime.

“RICO comes in because the fraud didn’t just happen piecemeal,” Heather Boone McKeever, a Lexington, Kentucky-based lawyer for the homeowners, said in a phone interview today. “This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

The suit, which includes claims of fraud, also names as defendants other banks, real-estate law firms and document- processing companies.

Senator Franken letter on mortgage fraud

It takes a former comedian to call government officials out on the carpet in their role regarding the massive mortgage fraud.

http://franken.senate.gov/files/letter/100930_All_Financial_Letter.pdf

Excerpt:

"I respectfully request that you collaborate to conduct a thorough investigation into the alleged misconduct," the letter reads. "As part of this investigation, it is crucial that Ally and its employees are held fully accountable for any criminal misconduct. Additionally, all homeowners who may have experienced illegitimate foreclosure sales, those who have been forced to defend against illegitimate foreclosure actions, and those who have been harmed must be identified. These individuals must receive proper restitution and compensation, as provided for under the law. It is also critical to confirm that no loans provided through the Federal Housing Administration or in conjunction with the Home Affordable Modification Program were associated with Ally's misconduct."