Daily Archives: August 22, 2012

Fixing the Mortgage Mess: The Game-changing Implications of Bain v. MERS

Two landmark developments on August 16th give momentum to the growing interest of cities and counties in addressing the mortgage crisis using eminent domain:

(1) The Washington State Supreme Court held in Bain v. MERS, et al., that an electronic database called Mortgage Electronic Registration Systems (MERS) is not a “beneficiary” entitled to foreclose under a deed of trust; and

(2) San Bernardino County, California, passed a resolution to consider plans to use eminent domain to address the glut of underwater borrowers by purchasing and refinancing their loans.

MERS is the electronic smokescreen that allowed banks to build their securitization Ponzi scheme without worrying about details like ownership and chain of title. According to trial attorney Neil Garfield, properties were sold to multiple investors or conveyed to empty trusts, subprime securities were endorsed as triple A, and banks earned up to 40 times what they could earn on a paying loan, using credit default swaps in which they bet the loan would go into default.  As the dust settles from collapse of the scheme, homeowners are left with underwater mortgages with no legitimate owners to negotiate with.  The solution now being considered is for municipalities to simply take ownership of the mortgages through eminent domain.  This would allow them to clear title and start fresh, along with some other lucrative dividends.

A major snag in these proposals has been that to make them economically feasible, the mortgages would have to be purchased at less than fair market value, in violation of eminent domain laws.  But for troubled properties with MERS in the title—which now seems to be the majority of them—this may no longer be a problem.  If MERS is not a beneficiary entitled to foreclose, as held in Bain, it is not entitled to assign that right or to assign title.  Title remains with the original note holder; and in the typical case, the note holder can no longer be located or established, since the property has been used as collateral for multiple investors.  In these cases, counties or cities may be able to obtain the mortgages free and clear.  The county or city would then be in a position to “do the fair thing,” settling with stakeholders in proportion to their legitimate claims, and refinancing or reselling the properties, with proceeds accruing to the city or county.

Read on.

Bankster of the week: Capital One

CHICAGO – Capital One Bank sued a woman for an $1,867 balance on a credit card she never sought or had, at an address where she had not lived for 10 years, and when she told it so, it changed the address on the card, added fees, and sent the bigger bill to collections, she claims in Federal Court.

Read on.

Jiang’s $310,000 At ICBC Compares To Dimon’s $23 Million

Via Bloomberg:


That pay-to-performance gap is set to widen this year. The state-controlled Chinese lender, led by Chairman Jiang Jianqing, may post second-quarter net income of $9.63 billion on Aug. 30, while Bank of China Ltd. will probably report $5.44 billion tomorrow, according to analysts’ estimates. New York-based JPMorgan last month reported a 9 percent decline to $4.96 billion following its trading loss in London.




Pay hasn’t kept pace with earnings in China, where government-appointed bankers have escaped the ire directed at overseas rivals for losing money on complex derivatives, money laundering or rigging rates. Still, the banks’ shares remain weighed down by concern that slowing economic growth will trigger defaults by developers and local governments.




“Chinese banks are risk averse due to culture, a different executive compensation structure” and the profitability of their lending operations, said Himanshu Shah, chief investment officer of Shah Capital Management in Raleigh, North Carolina. However, the banks are changing and will “resemble their Western counterparts to a great extent over the next five years.”


East vs West: Chinese Chief Better Value Than Dimon

Check out the video:



In BofA successor liability issue, whose law applies?

One of the fascinating aspects of the mortgage-backed securities litigation against Countrywide and its parent, Bank of America, has been the bifurcation between federal cases under the oversight of U.S. District Judge Mariana Pfaelzer in Los Angeles and state court cases overseen by Supreme Court Justice Eileen Bransten in New York. There’s some distinction between the issues before the two judges: Many of the cases Pfaelzer is presiding over involve claims under the federal securities laws in addition to allegations of state-law fraud and negligent misrepresentation, while Bransten’s focus has been on state-law contract issues in claims by bond insurers. But the underlying facts before the two judges are pretty much the same (as are many of the lawyers).
Last Friday Pfaelzer ruled, for the second time, that Countrywide MBS investors cannot proceed with claims that BofA is liable for Countrywide’s alleged wrongs. Just as she did last February in Allstate’s case, Pfaelzer found that MassMutual had not come up with sufficient facts to support assertions that BofA’s 2008 acquisition of Countrywide was a fraudulent transfer or a de facto merger that would make the bank legally responsible for Countrywide liability. MassMutual, like Allstate, is represented by Quinn Emanuel Urquhart & Sullivan, the firm that (as I’ve previously noted) has devoted more resources to and made m ore progress in battling C ountrywide and Bank of America than anyone else in MBS litigation. Pfaelzer’s dismissal of another set of Quinn Emanuel successor liability claims doesn’t bode well for Countrywide MBS investors hoping to get their hands on BofA’s money.

Read on.

FDIC Sues Banks for $2.1 Billion

Courthouse News:
AUSTIN (CN) – The FDIC, as receiver for Guaranty Bank, demands more than $2.1 billion from major banks that underwrote and sold securities backed by residential mortgages.
Click here to read Courthouse News’ Securities Law Review.
The Federal Deposit Insurance Corp. claims the banks pushed and sold the securities with false statements about the quality of the underlying mortgages.
The FDIC demands $900.6 million from these defendants, which charged Guaranty Bank $1.8 billion for eight certificates: Ally Securities; Goldman, Sachs & Co.; Deutsche Bank Securities; J.P. Morgan Securities; Structured Asset Mortgage Investments II; and The Bear Stearns Cos.
In a second complaint, the FDIC demands $677.4 million from these defendants, which charged Guaranty Bank $2.1 billion for 20 certificates: J.P. Morgan Securities fka Bear, Stearns & Co.; Merrill Lynch, Pierce, Fenner & Smith; RBS Securities; WaMu Asset Acceptance Corp.; and WaMu Capital Corp.
In the third complaint, the FDIC demands $559.7 million from these defendants, which charged Guaranty Bank $1.5 billion for eight certificates: Countrywide Securities Corp.; CWALT, Inc.; Countrywide Financial Corp.; Bank of America Corp.; Deutsche Bank Securities; and Goldman, Sachs & Co.
All the lawsuits are in Travis County Court.

Exclusive: Tracy Lawrence and the Foreclosure Suicide that America Ignored

By Mark Ames: Every week, it seems there’s another tragic story about a suicide or murder-suicides linked to foreclosure trauma. Some of the more spectacular murder-by-foreclosure stories the past few years have been collected by a blog called “Greenspan’s Body Count”—others, myself included, have been writing about these terrible stories of class warfare being waged by the only side fighting it, and winning it, as Warren Buffett rightly said.
Before the 2008 crisis, the media paid little attention to the death toll taken on Americans by the decades-long class warfare waged against the 99%. Now they’re impossible to ignore. Stories like the US soldier in Iraq who committed suicide so that his wife could collect life insurance, and save their family home from foreclosure. Or the courtroom-suicide in Phoenix, in which a Yale-educated banker-swindler swallowed a cyanide capsule after being found guilty of setting his 10,000 sq foot McMansion on fire as a way of collecting insurance and evading mortgage payments he couldn’t afford.
Despite the somewhat increased media attention given to these tragic stories nowadays, there is one suicide directly tied to foreclosure fraud that has been completely ignored by the media. Her name was Tracy Lawrence, and for a brief moment last year, between the moment she turned whistleblower and her untimely and bizarre suicide, Tracy Lawrence’s testimony threatened to blow the entire fraud-closure criminal enterprise wide open, with repercussions that could have easily reverberated all the way up to the major banks and GSEs complicit in one of the greatest crimes this country has ever experienced.

Read on.