Monthly Archives: September 2011
How Goldman Sachs Wrecked the World
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GRACIAS AMIGO’s
How Goldman Sachs wrecked the economy
How Goldman Sachs wrecked the economy
Many people are searching on google for this strange term “securitization audit”. What is it? Who needs a securitization audit? What does a securitization audit do? Do I need a Securitization audit? Ok lets see.. Bear with me I have to explain a little about the credit default swap and CDO madness first.
For a long time in order to mitigate risk or very specifically to aggregate specific types of risks, saavy investment bankers and institutions have pooled assets into portfolios and sold pieces of the pool of investments off to investors. Mutual funds, investment companies, real estate partnerships all have been designed to group either like assets or varied classes of assets into groups that were thought by the selling entity to have some marketable value to some section of the investment community or the public at large. The evolution of the mortgage bond did not hit its most damaging stride until after 2005 where very clever financial alchemists on wall street started to think that there really were methods of creating money from nothing.
Mortgages are by definition already asset backed paper collateralized by the underlying fair market value of the real property they encumber. Countrywide has underwritten $97 billion in subprime mortgages now serviced in large part by Bank of America but owned by mortgage backed securities pools and CDO’s all over the map. A subprime mortgage is a mortgage backed by real property differentiated from other conventional mortgages by the lack of creditworthiness and potential inability to pay of the actual homeowner exacerbated by the lack of information provided to the underwriter by the consumer (in what are commonly known as stated or liar loans).
The underwriters and ultimate purchasers of mortgages use a sliding scale to assess the extent to which a mortgage is subprime. The higher the credit score the less subprime. The higher the appraisal on underlying property (lower LTV) relative to the amount borrowed, the less subprime. The more information received in the form of tax returns, income, bank accounts, the less subprime. The more this information revealed to the underwriter such as: high income, significant savings and net personal equity, job stability, higher fica score and thus responsibility well obviously the less subprime. The more a homeowner puts down, the less subprime.
Goldman Sachs is largely responsible for the financial mess our world economy is in because of the role they played in creating a market for a completely an unregulated form of insurance bet and for Goldman Sachs role in designing an opaque form of derivative security (the CDO) from the most subprime of all mortgages and for taking complete advantage of AIG and AIGfd’s unwitting willingness to insure the most toxic layers of pools of subprime mortgages. They did this by taking the this riskiest bottom layer of Mortgage backed securities pools, scraping the risk off of these pools and selling the risk to AIG who was already over exposed to subprime through other CDS’s on standard Mortgage Backed Securities pools. Then Goldman payed Moody’s, Fitch and S&P to rate these newly formed “collateralized debt obligations” as investment grade or AAA rated paper. Goldman Sachs did this because a few very well researched speculators figured out a way go short on mortgage backed bonds and had an appetite for bets against the most toxic of mortgage pools and basically showed Goldman exactly what to create for them. They basically short ordered an economic disaster from Goldman so they could get rich on it. Goldman played the spread between what the speculators were willing to pay 2-3% annual premiums on the value of the pool they were buying insurance for and the 12 basis points Goldman tricked AIG into taking for insuring the pool.
These now criminally AAA rated but extremely complicated CDO securities allowed Goldman Sachs to stand in the middle of a trading triangle and make money from every side with very high margins because of the lack of understanding of how CDO’s truly function. They brokered deals between AIG and loan originators for CDS’s on MBS’s, between AIG and outright short speculators. (Greg Lippman and Mike Burry-Read Mike Lewis’ Big Short) Guys like these had a very serious appetite for CDS’s on the shittiest of mortgage paper because that was the best short bet on the mortgage backed securities market. And of Course between the large subprime lenders and investors with a huge appetite for paper that was now rated AAA, safe as treasuries but with much higher potential returns because they were backed with the ugliest of subprime mortgage notes with criminally high APR’s to be paid on the backs of unsuspecting homeowners who just wanted to buy a house to live in.
Here’s what wrecked our economy. Goldmans greed to stay in this highly lucrative triangle scenario was taunted by their inability to find pools of really shitty mortgage paper (for which there was now the highest demand. Demand for cds’s coming from speculators that AIG was unwittingly willing to sell to. This created Goldmans lowest hanging fruit for creating and marketing CDS’s. These factors and Goldmans unbelievable willingness to allow AIG to get wrecked for profit prompted Goldman to create and sell the gold embossed bags of shit (CDO,s) to investors for huge profits. Guess what every other Investment Banking firm on wall street did? Of Course, they created their own little trading triangle. This dramatically increased wall streets demand for shitty paper (golly gee, lets let anyone have a loan so Goldman can make money wrecking our economy) and this created the real estate bubble.. end of that little story.
OK I’m way off base.. I wanted to write an article on securitization auditing. Ok I have a little A.D.D sorry.
Paul Kiel ProPublica article
Nevada Wallops Bank of America with Sweeping Suit; Nation-wide Foreclosure Settlement in Peril
by Paul Kiel ProPublica
This post has been updated to reflect Bank of America’s response. The state of Nevada dramatically expanded its lawsuit against Bank of America today, turning the narrow case it filed late last year into a broadside that targets virtually all aspects of the bank’s mortgage operations. Bank of America has previously denied wrongdoing.
The sweeping new suit [1] could have repercussions far beyond Nevada’s borders. It further jeopardizes a possible nationwide settlement with the five largest U.S. banks over their foreclosure practices, especially given concerns voiced by other attorneys general, New York’s foremost among them.
In a statement, Bank of America spokeswoman Jumana Bauwens said reaching a settlement would bring a better outcome for homeowners than litigation. “We believe that the best way to get the housing market going again in every state is a global settlement that addresses these issues fairly, comprehensively and with finality.”
The suit also weakens a separate, 2008 multi-state settlement in which Countrywide promised to evaluate troubled homeowners for loan modifications.
Most broadly, Nevada’s action signals that the banks’ problems with home mortgages — the main cause of the financial crisis — continue to burden them and rattle investors. Bank of America, the nation’s largest bank and mortgage servicer, has seen its stock plunge [2] about 40 percent since March, due in part to its mortgage liabilities. Nevada’s action won’t help.
Nevada’s attorney general charges that Bank of America and the now-defunct mortgage giant Countrywide acquired by the bank in 2008, deceived borrowers and investors at almost every stage of the process.
According to the suit, borrowers were duped into unaffordable loans and then victimized again through a misleading mortgage modification program that homeowners tried to use to avoid foreclosure. Finally, the bank filed fraudulent documents to move forward with the foreclosures.
“Taken together and separately, [Bank of America's] deceptive practices have resulted in an explosion of delinquencies and unauthorized and unnecessary foreclosures in the state of Nevada,” the suit alleges.
The state’s suit had previously been confined to the modification issue [3]. At that time, Bank of America also said homeowners would be best served not through litigation but through reaching a multi-state settlement [3] to “broaden programs for homeowners who need assistance.”
In expanding the suit, Nevada’s Catherine Cortez Masto joins New York attorney general Eric Schneiderman in stepping up investigations of the bank. In addition to initiating a broad investigation of banks’ securitization practices, he recently filed a suit charging that Bank of America had fraudulently foreclosed on homeowners.
A coalition of all 50 state attorneys general has been seeking a settlement with the five largest banks to address their foreclosure practices, such as the filing of thousands of false sworn statements with state courts. Some critics have said the states were speeding to an agreement without thoroughly investigating the banks’ abuses [4].
Last week, fissures in the coalition became public [5] when Iowa attorney general Tom Miller, who leads the 50 state coalition, removed New York’s Schneiderman from the group’s executive committee, because, he said [5], Schneiderman had “actively worked to undermine” its efforts by opposing any quick settlement [6]. As part of any settlement (reportedly [7] in the range of $20 to $25 billion), the banks have been seeking a wide-ranging release [8] from future legal claims, not just those related to foreclosure practices. Schneiderman has publicly rejected that idea and pushed ahead with his investigation.
Masto’s suit signals that Nevada may also reject any settlement in the near future on the foreclosure issues. Two other attorneys general, notably those fromMassachusetts [9] and Delaware [10], have also recently voiced concerns about any broad waiver of claims. Geoff Greenwood, the spokesman for Iowa’s attorney general, declined to comment on Nevada’s suit.
Nevada’s newly expanded suit also undermines a previous settlement between Countrywide and numerous attorneys general. In 2008, as part of that settlement, Bank of America agreed to implement a mortgage modification program to address charges that Countrywide’s marketing and lending practices had defrauded borrowers. That promised wave of modifications never came [11], however, so Nevada alleges Bank of America has breached the agreement. The expanded suit revives those allegations.
In its new claims, Nevada also charges that Countrywide bungled the process of bundling loans into securities by not properly documenting the transfer of assets. Despite the lack of documentation, Bank of America has fraudulently pursued foreclosure on these homes anyway, the suit charges.
New York’s Schneiderman made similar charges earlier this month when he sued[12] the Bank of New York Mellon, which, as trustee for several pools of Countrywide loans, was supposed to oversee the securities for investors. Countrywide’s failure to transfer complete mortgage loan documentation “impair[ed] the value of the notes secured by those mortgages” and “triggered widespread fraud, including Bank of America’s fabrication of missing documentation,” the suit charges [13].
Bank of America servicing fraud
Bank of America Servicing Attack after modification
For those of you diligently hard headed or lucky enough to be one of the very few to get a real internal investor approved/non-hamp modification of the terms of your note with Bank of America as successor to a Countrywide mortgage because of uncovering the extreme underwriting fraud, there is more utter bullshit awaiting you from Bank of America. Here’s what you can expect. And this is why you should file a Quiet Title action instead of negotiating with these piece of s$%t banks.
Ok, first lets look at Bank of America’s motivation after a meaningful modification.. I am using my mortgage and my modification and will disclose the documents in this article. My house at one time was worth maybe 1.2 million. Now it is worth at best case $500k. I still owe a little more than $600k after this modification in principal balance. I was in a 2 year option arm underwritten in 2005 at a start of 7.32% with a 5 point margin over the 6 month libor index capping at 10.875%. I’m not going into all of the underwriting fraud, you can read that in the pdf of the forensic audit I’ve pdf’d below. As you can see from the pdf of the modification agreement (again below) I managed to get Bank of America to modify the terms (after rescinding my loan) to a 5 year 2% with elevation language capping out at 5% over ten years and then balooning. So my Principal and Interest payment dropped from $4k+ to $1900.
Lets look at what the banks new motivation is and why I become a strong target for them in the wake of this modification. If they can somehow get me behind on these new payments, they have already illegally substituted in an illegal substitute trustee (recon trust) into the local County land record so they can now quickly foreclose on me. By the way for Virginia residents, Recon Trust is incorporated in California and Virginia statute requires that any trustee for deeds of trust registered in the Virginia land record be incorporated in the state of Virginia. Yes; Only Virginia residents may be named or act as trustees. Also, no corporation may be named or act as trustee unless it is chartered under the laws of Virginia or of the United States of America, and unless its principal office is within Virginia. Va. Code § 55-58.1.
If they foreclose, they will receive lets say a 10% fee calculated from the probable REO sale value of the house (approximately $50k) Then, upon sale of the property as REO they may very well make another 2 or 3 % new loan underwriting fee so lets say $10k. The new loan will be underwritten and AGAIN sold into a mortgage backed securities pool with yet another premium to the bank so lets add another $10k. So bank of America, who is servicing the loan for a Mortgage Backed Securities pool or a REMIC can either take their diminished piece of the serving fee from my 1900 modified monthly payment or cash my ass in for a direct cash infusion of $70,000 and still retain the servicing rights from the new MBS on a much higher monthly servicing fee. WTF do you think they are going to try to do.. Thats why the one thing you can rely on with these predatory lenders and the financially elite in general (from the financial sector specifically) is that to these institutions we are CATTLE. To them we are meant to be fattened to be slaughtered even under a modification agreement. They figure out how to fatten something about our situation and then harvest the prosperity for their own benefit. It’s not a conspiracy theory, its logic.
The financial sector is a fattening and harvesting machine. The last big play was to use appraisal fraud and subprime mortgages wrapped with credit default swaps into MBS’s to manipulate Standard and Poors, Moodys, and Fitch into believing that mortgage bonds were investment grade paper. This in order to create a tsunami of investor demand and make trillions of fees selling this shit to investors. Which created an enormous real estate bubble and allowed the herd of cattle to believe that buying real property was financially rewarding. Meanwhile the wall street elite bet against the CDO’s using credit default swaps and made trillions (paid for in bail out money they argued was necessary to save our economy) Harvesting all of the fake value of our homes at the peril of the entire world economy.
Now they do the inverse and have it rigged at the FDIC to double dip on foreclosures. They either give a beneficial modification and then use servicing fraud to foreclose for foreclosure and MBS servicing fee’s or they use robo-signors and fake trial modifications to get a homeowner significantly further in default and foreclose for the FDIC loss share insurance and the foreclosure fee’s. The banks want your house..
I’ll post the pdfs later today…
