Investors and Borrowers Unite!

Posted October 28, 2009 by livinglies

If you peal away the apparent differences you find that there is an
inherent joinder of interest investors and borrowers: both were
deceived and both lost nearly everything they had by purchasing a
financial product that was misrepresented — artificially inflated as to
quality and value. And both were subject to the same MO — using third
parties to create the appearance of propriety and conformity with the
applicable laws, while the real purpose was simply to take the money
and run.

Thanks to Dan Edstrom: This is a comment bringing to our attention
the lawsuit of the real lenders (the investors) against the
intermediaries, pretender lenders and conduits in the securitization
process. It of course looks very familiar. They are saying that they
were misinformed, led astray and lost money. What is not stated is that
they were “qualified investors” who because of their size and
sophistication are deemed to have greater access to information and a
greater ability to assess risk on their own. And even they got duped.
So our point is that the homeowner is the LEAST sophisticated player as
a party in interest. Thus the homeowner should be the one to suffer the
least amount of damage. As is usually the case with American politics,
the current situation is standing on its head. The homeowner generally
doesn’t have a clue as to what is really going on with his “loan
product,” and even if he had some idea, wouldn’t know what to do with
the information. And Yet the brunt of this crisis is falling on the
people who were MOST vulnerable.

My solution is for attorneys, particularly class action attorneys,
to put their differences aside. One might argue that the investors, as
real lenders have an interest that conflicts with the interest of
borrowers of their money. Conversely one might argue that borrowers
might have claims against the real lenders whose money set this whole
process in motion, and counterclaims and affirmative defenses in
foreclosure or mortgage litigation (whether the loan is in distress,
non-performing, or otherwise). But if you peal away the apparent
differences you find that there is an inherent joinder of interest
investors and borrowers: both were deceived and both lost nearly
everything they had by purchasing a financial product that was
misrepresented — artificially inflated as to quality and value. And
both were subject to the same MO — using third parties to create the
appearance of propriety and conformity with the applicable laws, while
the real purpose was simply to take the money and run.

Only the real lenders can actually re-structure these loans. It is
true, when all is said and done, that the restructuring alone will only
provide them with cover on 10%-35% of their investment. But that is
geometrically more than the write-downs currently being imposed by Wall
Street and they lay off the risk onto the investors and the taxpayer.
But the solution doesn’t end there. A joint claim for damages against
the intermediaries who obviously knew they were creating loans to fail
so that they could collect on credit default swaps and higher service,
fees, would net both the investor and the borrower a hefty judgment.
The judgment would either be paid or it would levied against assets of
the the losing party(ies). Those assets would include mortgages claimed
to be owned by the pretender lenders, unopposed by other borrowers.
Hence the early bird here would be able to recover as much as 100% or
more of the investment in mortgage backed securities and play a
societal role in re-structuring loan products that were brainless and
predatory in their conception and execution.

So take a look at the entry below and go looking for other lawsuits
from investors against the underwriters who sold mortgage backed
securities. They probably have done a lot of your discovery for you.
And you might end up with a deal in which the borrowers and the
investors come into the same courtroom crying foul against the players
in the middle. Then, and only then will they have no place to hide.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
From Dan Edstrom: Things are changing indeed! Check out this investor
lawsuit that is the other side of the coin to the borrowers lawsuits
against the “pretender lenders”. This is huge and goes to the heart of
everything Neil Garfield has been saying. Notice they are not going
after the borrowers, but the REAL cause of the failed mortgages.

Excerpt:
The complaint alleges that the Registration Statements omitted and/or
misrepresented the fact that the sellers of the underlying mortgages to
JP Morgan Acceptance were issuing many of the mortgage loans to
borrowers who: (i) did not meet the prudent or maximum debt-to-income ratio purportedly required by the lender; (ii) did not provide adequate documentation
to support the income and assets required for the lenders to approve
and fund the mortgage loans pursuant to the lenders’ own guidelines;
(iii) were steered to stated income/asset and low documentation mortgage loans by lenders, lenders’ correspondents or lenders’ agents, such as mortgage brokers, because the borrowers could not qualify for mortgage loans that required full documentation; and (iv) did not have the income required by the lenders’ own guidelines
to afford the required mortgage payments which resulted in a mismatch
between the amount loaned to the borrower and the capacity of the
borrower.

According to the complaint, by the summer of 2007, the amount of
uncollectible mortgage loans securing the Certificates began to be
revealed to the public. To avoid scrutiny for their own involvement in
the sale of the Certificates, the Rating Agencies began to put negative
watch labels on many Certificate classes, ultimately downgrading many.
The delinquency and foreclosure rates of the mortgage loans securing
the Certificates has grown both faster and in greater quantity than
what would be expected for mortgage loans of the types described in the
Prospectus Supplements. As an additional result, the
Certificates are no longer marketable at prices anywhere near the price
paid by plaintiffs and the Class and the holders of the Certificates
are exposed to much more risk with respect to both the timing and
absolute cash flow to be received than the Registration
Statements/Prospectus Supplements represented. [Editor’s Note: Same as
the houses]

http://www.csgrr.com/csgrr-cgi-bin/mil?case=jpmorgan&templ=cases/case-pr-print.html

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One thought on “Investors and Borrowers Unite!

  1. Holder in Due Course, comments by Dawn RapoportPosted October 25, 2009 · mariokenny.wordpress.com© July 2009 Dawn RapoportTo understand the holder in due course you also must pull the trust documents, pooling and servicing agreements. Another way to address the issue, Neil Garfield, Esq has made this agrument, but until you actually go to the agreement its hard to grasp. Each loan sold and purchased by a sec trust had particular guarantees under the PSA, to cover claims if there is a violation of one of the guarantees, the loan is required to be covered by lenders mortgage insurance, which is different from the coverage of pmi, the trust psa will explain which one covers for which, the borrower generally has. Coverage. You have to check the pool cut off date, default claims applicability, repurchase requirements, etc. Show me the note goes much farther than that simple statement, as Neil said, its evidence, the ucc hasnt been rewritten, crafty lawyers have just gotten away with avoiding it for too long. Be smarter than them, start from the basics then throw their own craft back at them. The judges are starting to get it. If you don’t get a state judge to understand it, file a federal complaint and get the state action stayed. The investors in the mbs already paid too, this is what Neil is talking about, but in addition to that and these potentially unknown claimants, the insurance was likely already paid on the default. You have to go to the trust docs to support yourarguments by fact, its all there though.Now we have even more ammo with the EESA, use it, go pull the contracts, make the lender provide the required certificate ofcompliance its a condition precedent for participants. If the lender, trustee, bank etc tries to state they were not a recipient, because they dont directly receive the funds, dig further, kindalike connect the dots or piercing corporate veil, show how servicer received funds which servicer is tied to trustee through psa….trustee might be a subsidiary too to a recipeint, all crafty lawyering to purposefully evade the law and keep taking peoples homes.It takes a lot of work, a lot of time, they have been doing this for years while we are trying to catch up and hold them to the things they have avoided for a long time. judges are starting to get it too..Judges are starting to see that crafty lawyering to help entities purposefully evade the law should not take precedent over consumer protection.All my best and thanks again, Neil Garfield, Esq for your inspiration.***THIS IS MY LAWYER AND SHE GETS IT***

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