What Really Happened? – READ FIRST

DISCLAIMER: I am not an attorney. The information contained herein, although accurate and verifiable, should not be construed as legal advice. Please consult with competent local counsel before undertaking any of the actions you will learn about from reading this letter.

I have read that close to half of all homeowners who face foreclosure take the position that because their lender hasn’t received their mortgage payments on time, that they are in default and will have to move out of their home. They feel helpless and give up, surrendering their home to the bank.

The other half oftentimes will attempt to make some last-minute effort in order to buy them some additional time before being evicted, and the courts may grant them an additional month or two.

What you probably don’t hear too much about is the less than 2% of homeowners that learn about the fraud that occurred in the “housing/sub prime mortgage crisis”, discover what their rights are, and fight their lender in court. Why don’t you hear about them? Because they are winning.

This letter will explain how to be part of that 2%.

The first thing that you need to understand is that there was a massive amount of fraudulent activities taking place in the mortgage industry that you could have never known before you received a loan. Financial institutions have a responsibility, a fiduciary duty, to protect the interests of their customers. These duties were breached on every level, and as a result have caused this massive worldwide economic crisis we hear about every day.

If someone facing foreclosure has a basic understanding of what really took place, he/she would realize that there are numerous ways to challenge the parties involved and prevent those parties from stealing your home. Yes, they are trying to steal your home.

Nowhere in the media has anyone had the guts to put all of the pieces together so that average Americans could understand what really happened. Congress either. If you spend any time watching the financial media or listening to congressional hearings you will hear terms like appraisal fraud, mortgage backed securities, credit default swaps, rating agencies, AIG, loan securitization, over-collateralization, cross-collateralization, reserve pools, etc. These are pieces of the puzzle that nobody wants to put together. If they did, there wouldn’t be any foreclosures.

Confused? Let’s start with some basics and keep things simple.

In some form or fashion, you received a loan. Either you purchased a home or refinanced an existing loan. You more than likely dealt with a mortgage broker, filled out their required paperwork, were approved for the loan and closed the transaction. Prior to the loan closing two things occurred; an appraisal of the property the loan was for and the review of all your documentation by an underwriter.

Granted, it was a little more complicated than that, but this takes us to the point of you getting the actual money. Now let’s look at how the money got to you.

There was a growing housing market. Property values were increasing at record pace, creating an environment where investors could earn a safe return by investing in securities backed by home mortgages. The money put up for these investments became the source of funding for home loans and refinances.

So you have two groups; the borrowers who wanted the money and the investors who supplied the money. One could not exist without the other, however there needed to be another party to get the two together. For a fee, of course.

In an attempt to generate hundreds of billions of dollars, a scheme was created that defrauded borrowers and investors alike. The borrowers were defrauded by predatory lending practices, regardless of whether they were considered “sub-prime”. The investors were defrauded by being shown bogus AAA ratings for the security they were investing in, when in reality they were investing in worthless junk. Here’s what took place:

To start the scheme, the appearance of a booming housing market needed to be created. If you want to make people believe that housing values go from increasing in value 3% per year to over 10%, with those increases taking place in just a matter of years, you would need the help of the appraisal industry. While most people assumed that appraised values were coming in about 10% more than the real value of the house so the lenders could make more profits from refinances, most home sellers turned a blind eye because they were realizing the extra proceeds from the sale of their homes. As you will soon see, this was a necessary requirement in creating this mess.

In 2005, the Appraisal Institute, a national organization most licensed appraisers are members of, put together a petition signed by 10% of its members (approx. 8000 signatures) and went to congress. The story got little coverage by the media.

In congressional hearings, the key leaders of the Appraisal Institute testified that some of their members were not receiving any work from lending institutions because they refused to falsify reports that would artificially inflate housing values. This meant that there were over 72,000 licensed appraisers across the country that were knowingly and fraudulently increasing the appearances of property values at the lender’s request. If they refused, the lender would find another appraiser to use, and he or she would not get nearly as much work. The Appraisal Institute recently filed a class-action lawsuit against many of these lending institutions.

By acting in concert with the appraisers, the lending institutions were able to trick the world into believing that the American housing market was a sure way to get a safe return on investing in real estate. Since foreign investors couldn’t very well purchase and manage properties from overseas (as that would be too complicated), the lending institutions got together with the Wall Street investment firms to devise a plan that would attract the money from investors needed to finance the loans for borrowers. Enter the mortgage securitization process.

The investment banks on Wall Street created an entity that could be invested in called a Special Purpose Vehicle (SPV). By investing in the SPV, an investor was issued certificates that entitled them to part of the revenue stream created by the SPV. The revenue stream came from the monthly payments made by the borrower. At least, that was what was supposed to happen.

In order to demonstrate confidence in any investment, the owner of the entity he/she wishes to attract investment in will seek a rating endorsement. The big ratings agencies are Standard and Poor’s, Moody’s and Fitch’s. Perhaps you’ve heard of them. The investment banks would show the rating agency the details of the SPV and the rating agency would rate the investment as AAA, AA, A, BBB, BB…you get the point. Under normal circumstances, those looking to invest with the minimum amount of risk would only invest in a AAA-rated security. Those looking to take more risk in exchange for the chance to earn a higher yield may be inclined to invest in something lower than a AAA rating.

Now the world believes America has rapidly increasing property values and the securities available to invest into are backed by mortgages of borrowers with impeccable credit and a low risk of default. The money began pouring in so fast from willing investors that there was more money to lend than there were borrowers to borrow. Enter sub-prime and predatory lending.

The lending institutions needed to attract more borrowers, and put pressure on the mortgage brokers to solicit more business. In order for a loan to be approved, the borrower’s paperwork (tax returns, job history, monthly debt obligations, etc.) had to be sent to the lender’s underwriter, who ultimately approved or denied the loan.

Since the source of funding these loans came from the investors and not the mortgage brokers or lending institutions themselves, there was no risk to the “lender’s” balance sheets if the loan defaulted. If there’s no risk of loss, why bother with the approval process? And don’t wait for potential borrowers to come to us for money; let’s make loans to everyone. Hire telemarketers to entice people to borrow money without the need for it (by selling them on the fact that they can take a loan against the equity of their home, regardless of their credit, regardless of the interest rate, and refinance again at a later date because property values are increasing while interest rates decrease), make loans to people with bad credit, stop verifying job history and monthly debt obligations. Abandon the underwriting process completely.

This actually happened. Jerry Brown, the current Attorney General of California, in his case against a major player in predatory lending discovered that underwriters of this leading lending institution were under quotas to approve approximately 80 loans per day. So I ask you, how long do you think it would take you to re-read your entire loan application, verify the information you supplied to back up your ability to repay the loan, and go through the bureaucratic mess of having your supervisor sign-off on the loan approval? In an eight-hour shift, that would be one loan approval every six minutes. If you honestly could pull that off, please come work for me. I would make you employee of the month on your first day.

Hopefully now you have a basic understanding of how you, as a borrower, were defrauded. False appraisals and the abandonment of underwriting standards. This becomes the basis of the “lender’s” failure to perform their duty to you to disclose crucial information that could have affected your willingness to take a loan. While provable in court, you’ll need to tie it all together in order to defend against your foreclosure. Let’s look at the other party to the transaction, the source of funds and how they too were defrauded.

When investors looked to put money into the SPV’s they were shown a AAA rating. It was a safe investment, it couldn’t lose money. As it turned out however, the SPV actually functioned like a ponzi-scheme.

When the SPV was created it was structured into tiers (tranches) from the top down. After a borrower’s loan closing, their promissory note was pooled together with 100′s or 1000′s of other notes and that pool was assigned to one of the levels of the SPV.

Each level of the SPV was assigned a rating; AAA on top, AA below that, A below that, etc. The mortgage pools were equally rated and placed into the appropriate tier of the SPV. AAA rated mortgage pools assigned to the AAA tier, AA rated pools went to the AA tier, etc.

Most of the investors thought they were only investing in a AAA rated security and were not made aware of the lower rated tiers below. When you send in your monthly mortgage payment, that money eventually ends up in the hands of the person that assigns your payment to pay off the investor of one of the tiers of mortgage pools, although it may not go to the same investor that is owed money from your mortgage pool. Now you have a situation where your payments are paying someone else’s mortgage.

Since the SPV was structured as tiers from the top down according to the rating of the various pools, the last tier became known as the Toxic Waste Tranche. As far as ability to repay was concerned, the mortgages of this pool were known to be extremely likely to default, and any money that came into the tier (or should have) was immediately assigned to pay into a higher tier.

Just like a ponzi-scheme, the lower levels repaid the higher levels. And just like a ponzi-scheme, as more of the lower leveled loans went into default, less money began going up to the other tiers above, eventually causing the SPV to collapse as an investment. The collapse can be delayed however by replacing defaulting loans with performing loans, which happened and is still happening. There were also insurance policies from companies like AIG that would pay out to cover investment losses.

It was scam concocted by Wall Street investment bankers. Pure and simple. Here’s a quote from a financial expert on CNN talking about Merrill Lynch and the rating agencies:

“I misspoke earlier in the interview. I meant to say recent mortgage lending is the largest Ponzi scheme (not “one of the largest”) in the history of the financial markets. The mortgage lending business model is not viable. Money from new investors partially funds the obligations to old investors. High dividends suggested a very healthy business model, but the mortgage loans were unsound creating an unsound business model.” http://money.cnn.com/video/#/video/news/2008/07/31/news.073108.tavoli.cnnmoney

To pull this off, the investment bankers needed the SPV’s to be AAA rated. Because the rating agencies themselves were competing for market share, they turned a blind eye to the fact that these investments were destined to fail in order to enrich themselves and increase the value of their own stock. The failure of the rating agencies’ obligation to perform due diligence and issuing intentionally overrated ratings is well documented in various news stories, and there should soon be some legal action from the SEC.

I understand this information may be a little complicated to follow along with and understand for the first time. It can be explained in a more technical way and I left out some other facts, but for now let’s talk about how this all relates to foreclosure. Remember, borrowers defrauded by predatory lending practices and tricked into thinking property values would continue increasing, investors defrauded by being tricked into investing money into something that was shown to be without risk.

It is basic law that the only party who can bring legal action against another is the party that was damaged. It would seem then that the only party who would have standing to bring a foreclosure action would be the investor who put up the money. This is the party that holds your note; this is where your money goes. This is the “holder in due course”.

In Michigan, the party named on your mortgage as nominee (usually a mortgage servicing company that you send your payments to) is granted the authority to foreclose on someone’s behalf. This makes it difficult to challenge foreclosure in the state courts.

The reason you utilize the “holder in due course” defense in foreclosure is to prove that whoever is trying to foreclose has the authority to do so. It is crucial to begin questioning the ownership of the note you signed right from the beginning.

See, at closing your mortgage broker had the paperwork drafted to give the appearance that they immediately assign your loan. In fact, you probably never sent a payment to the broker, but rather to the party named on your mortgage as the “lender” or the “lender’s” servicer. According to your closing documents, the source of funding for your loan came from the “lender”.

But you already know from reading so far that the source of funding came from investors. The “lender” didn’t loan anything. The actual source of funds for your loan was never truthfully disclosed to you. This is a blatant violation of the Truth In Lending Act, and violations in TILA allow you to rescind your loan, and be entitled to receive back all monies paid for closing costs, down payment and monthly principal and interest.

Even more, by standing in and pretending to be the real source of funding, the “lender” was paid a fee of 2.5% of the loan amount to rent their lending license to someone that was not registered to do business as a lending institution, nor registered to do business in the state. This defrauds the state governments out of billions of dollars in revenues each year. Under the Truth In Lending Act, that 2.5% was supposed to be disclosed to you and has taken the form of an illegal kickback.

Here’s the kicker: the “lender” on your closing paperwork was PAID IN FULL! That’s right, you don’t owe the “lender” anything. If the “lender” is trying to foreclose on your home, you simply need to ask a judge to take judicial notice of their sworn filings with the Securities Exchange Commission and FDIC. Those statements will show that they sold your loan into a pool. Do you think the judge would allow them to lie to you about already being paid and get to take your house as well?

State law requires all rights of property title to be recorded at the county records office for the county in which the property is located. If your mortgage is recorded as being held by the “lender”, you already can prove that they sold the note to an undisclosed third party and that sale was not properly recorded. Even if the “lender” sold the servicing rights (rights to collect the payments) to a different party and properly recorded that assignment with the state, and now that party is the one attempting to foreclose, you would have every right to question whom that party purchased your mortgage from.

In other words, Party A immediately and secretly sold to Party B, but Party A has their interest recorded with the state. Later Party C purchases from Party A and properly records the purchase as purchasing from Party A. Perhaps Party D eventually purchases from Party C. The point is, there is no accurate record of any purchase from Party B, who is the true and undisclosed owner.

How this is argued by the “lender”, or whomever you send your payments to, is that they are the holder of your mortgage. Party B holds the note you signed, not the mortgage. The note and mortgage are separate items, but have to be held by the same party in order to be enforceable. Party B, being an undisclosed party can turn around after the closing and sell the rights to the revenue of your note to anyone. Now you are looking at multiple parties being able to enforce the same note putting homeowners in a position where they would be foreclosed twice, or more. This has happened already. No mention in the mainstream media.

The rights to the revenue of your note could also be split. In truth, there could be 1000′s of people or parties that have rights to some portion of the revenue of your note. And the only way to find out is to have the foreclosing party get all of these people to the table in court.

Only the true holder of the note, the “holder in due course”, can prove damages that would entitle them to the proceeds of the sale of your home. But how do you know if the “holder in due course” didn’t get their money? Even more, what if they were already paid?

The securitization process of your note added co-obligors as it moved up the chain into the SPV. By co-obligors I mean other ways that would keep the revenue stream flowing. You already know that money from a mortgage pool in the SPV that was under your mortgage pool could have been paying the investor that funded your loan. What we haven’t yet talked about is AIG.

If these SPV’s were rated so high, why would they need to be insured? Because they were junk. Investors relied on the ratings and were not showed the entire package, but to keep the revenue flowing for as long as possible they had insurance policies that would pay out in the event of a default.

In some cases, the notes were sold more than once, or were sold for more than they were actually valued at. This over-collateralization allowed the investment bankers to create a reserve pool in which to pay investors, essentially using the investors own money to repay them, perhaps even paying them in full.

These are reasons why it is so important to challenge the foreclosure: it’s nearly impossible to prove if you, in fact, are even in default.

Hopefully by now you’re a little pissed off. I’m not even going to bother getting into the government bailout of these criminals. And while most people may be upset at the fact that taxpayers were forced into giving up over $900 billion, they would be even more upset to discover that for the two weeks leading up to the bailout bill the Federal Reserve was loaning over $400 billion a day to investment bankers so they could quietly buy out the certificate holders who were defrauded in this investment scheme. Again, no mention in the mainstream media.

The bottom line is this: you did not get a loan. The closing was a trick that got you to provide your signature so that someone could issue an unregistered, unregulated security that was used to defraud millions of investors out of their money while earning hundreds of billions of dollars in illegal profits for themselves. This was done in your name.

If you decide to take some action, you need to challenge everything. Challenge the true ownership of the note. Challenge the default itself. Go after everyone involved in your transaction for violations of the Truth In Lending Act, Home Ownership Equity Protection Act, Real Estate Settlement Procedures Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act. Make counterclaims for Fraud, Securities violations, Usury. Get your money back. Seek damages. Keep your home!

Your options are not simply limited to Bankruptcy or a loan modification.

I have spent close to the past year helping my landlord fight his foreclosure. We sued Fifth Third Bank in February, prevented the sheriff sale from taking place and are getting close to a settlement that will greatly reduce his payments and let him keep his home. There are damages coming to him as well. He has not made a house payment since August of 2007. It is now mid-December of 2008.

When I offered to help him I was like you, I didn’t know any of this. Learning how to fight foreclosure became a full-time job for me. I don’t know everything and I am still learning new things daily. But I know enough to help others and have done so on a word-of-mouth basis to a few people.

Every situation is different, but there is sort of a system you need to follow if you’re going to begin this battle. I have letters generically written you can send to everyone involved, I’ll share with you the questions you’re going to want to begin asking. You won’t get many answers, but it allows you to begin building a case against whoever is trying to take your home.

My fee for helping you through all of this is only $200 and I can get you up to the point where you will have a solid case. I can draft pleadings and motions for you for use in court. I can even assist you in finding an attorney familiar with these tactics or explain how you would go about defending yourself in court. Due to the holiday season I am even willing to accept a partial payment up front. This is not about the money for me.

Michigan law states that the foreclosing party must advertise the sheriff auction once per week for the four weeks prior to the actual sale. At most you have five weeks to build a case, and all of the remedies that could be available to you will go right out the window if you do not sue the foreclosing party before the sheriff sale. You will need to begin taking some steps quickly.

The fee to file a complaint in Federal Court is $350 (you can file for pauper status if you can’t afford to pay). While not necessary immediately, you will probably want to pay a company to audit all of your loan documents. There are some things I personally know to look for but I recommend hiring a trained professional. They charge, on average, $500. Your only other beginning expenses will be postage, which will begin adding up. You may not need to send everything out via overnight delivery (depends on amount of time until sheriff sale takes place), but you do need to pay extra to send everything out registered mail with return receipt.

If you haven’t already, you will soon begin being solicited by bankruptcy lawyers and loan negotiators. Please do yourself a favor and use diligence if you plan on hiring those services. Many of the loan negotiators are scammers.

All of the information here is accurate. If you’d like, I can send articles as well as court filings from around the country of other homeowners so that you can do some research on your own to verify what I have said here.

Should you like my assistance, you can contact me to schedule an appointment. I live in Mt. Clemens and work out of my home.

You can fight, and you can win. I hope you decide to make a stand.

Happy Holidays,

Mike Tiner

586.322.4625

isellthem@gmail.com