Do an internet search on mortgage fraud and try to find even a single case of a prosecutor going after a mortgage broker or lender for defrauding a borrower. I dare you. If you find a case please let me know. There are plenty of cases involving straw buyers and others who have defrauded the lenders but no prosecutions where the borrower was defrauded. There have been no significant prosecutions for mortgage origination fraud, yet that is the precise crime that precipitated the Great Recession and the near total collapse of the economy. The prosecutors who claim to be so tough on mortgage fraud will not touch mortgage origination fraud including predatory lending. The only explanation has to be that there were agreements orchestrated by federal prosecutors all across the country, with the concurrence of state and local prosecutors, not to prosecute mortgage origination fraud and predatory lending.

On May 20, 2009 at the signing into law of both the Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act, President Obama said, “[a]nd that’s why this bill nearly doubles the FBI’s mortgage and financial fraud program, allowing it to better target fraud in hard-hit areas.  That’s why it provides the resources necessary for other law enforcement and federal agencies, from the Department of Justice to the SEC to the Secret Service, to pursue these criminals, bring them to justice, and protect hardworking Americans affected most by these crimes.  It’s also why it expands DOJ’s authority to prosecute fraud that takes place in many of the private institutions not covered under current federal bank fraud criminal statutes — institutions where more than half of all subprime mortgages came from as recently as four years ago.”

So what has Attorney General Eric Holder, the President’s point person on mortgage fraud prosecutions, done to implement these laws? He has lied about how many prosecutions have taken place. In August 2013 reporters from Bloomberg wrote that the 2012 Holder press release fudged the number of mortgage fraud prosecutions brought by the Department of Justice by 400 percent. As Rolling Stone contributor Matt Taibbi pointed out, after the revelations in the Bloomberg piece, the DOJ went so far as to edit the press release to reflect the correct numbers.

That brings us to California Attorney General Kamala Harris. On May 23, 2011 Harris announced the creation of the California Attorney General’s Mortgage Fraud Strike Force. At the press conference shown in the video below she declares  that the Task Force “…is a new, multidivisional division in the Department of Justice, designed to protect innocent homeowners and bring to justice those who would defraud them. This is the first such strike force in the history of the Department of Justice. And as California’s real estate boom set a trend for the rest of the nation, so will our policing of its dark side.”

As Harris said, “First is the Consumer Enforcement Team, which will take on the worst of the scams of the consumer arena, including predatory lending, unfair business practices, deceptive marketing and loan modification, and foreclosure scams.” And she leaves the best for last when she says “As a career prosecutor, I believe there should be accountability and consequences for wrongdoing and crime… and it for that reason we created this unit.”

I still have not seen any evidence of Harris’ office bringing any prosecutions for predatory lending or mortgage origination fraud, and very few of any other type of mortgage fraud. So far, Harris’ policing of the dark side has not even begun to set a trend for the nation.

The same day Harris made her pronouncement about prosecuting mortgage fraud of all types, Alameda County District Attorney Nancy O’Malley put out her own press release beginning with the following:

Alameda County District Attorney Nancy E. O’Malley announces the creation of a new program entitled the Homeowner Education and Loan Protection (H.E.L.P.) Program that is designed to address crimes involving real estate on a multi-disciplinary, multi-system collaborative basis using education, prevention, and prosecution to target real estate fraud. The DA’s program will address fraud within Alameda County and will also work in conjunction with the California Attorney General’s Office to build a comprehensive statewide response to these crimes, an effort unveiled today in Los Angeles by Attorney General Harris.
The Alameda County DA’s new program will serve to protect a victim’s home, prevent large-scale scams, and hold individual criminal accountable. H.E.L.P. will partner with law enforcement agencies, community groups, and financial institutions to provide effective and proven strategies to improve local, regional, and national capacity to identify, intervene in, investigate, and prosecute real estate fraud cases while supporting and educating homeowners against fraud.

We contacted O’Malley’s office in early 2013 with details about our mortgage origination fraud, including forging of a loan application. In response, on April 12,2013, Inspector Pat Johnson of the Consumer and Environmental Affairs in O’Malley’s office called me and stated that if we could identify the forger, the office would prosecute. We know of a handful of likely candidates who potentially committed the forgery, but cannot identify specifically who did it. Given the details we provided it would seem like a simple process for the experienced investigators in O’Malley’s office to determine the identity of the forger.

I contacted O’Malley’s office again in October and ended up talking with Deputy DA David Lim, who handles mortgage fraud cases for her office. I told Lim I had been unable to find any cases of the Alameda County DA’s office prosecuting mortgage origination fraud. Lim then revealed that in 2008 there was a meeting with Joe Russoniello, then the U.S. Attorney for the Northern District of California, along with State and local prosecutors. According to Lim the group agreed it was too hard to prosecute mortgage origination fraud (predatory lending) because it can be difficult to prove whether the lender or the borrower committed the fraud. In other words, federal, State and local prosecutors agreed none of them would prosecute mortgage origination fraud, no matter how egregious. This in spite of the fact that they have all made public proclamations they would vigorously pursue these cases. Per the 2008 agreement the Alameda County DA’s office has not and will not prosecute mortgage origination fraud.

What we still do not know is if the meeting hosted by a federal prosecutor in Northern California was duplicated across the country. The lack of prosecutions nationwide suggests it is very likely the case. Clearly, policies started under the Bush administration have not been changed by Obama, just as the policies begun under the predecessors of AG Harris and DA O’Malley have not changed. More frightening is that the same people who perpetrated fraud on borrowers are still in business. Most mortgage brokers are licensed by the states, yet they have paid no price for their misconduct. Licenses need to be revoked, and some ethics and honesty restored to the business. Without prosecutions of this criminal conduct which has destroyed so many lives, there is no incentive for anyone in the industry to change their ways. It is time for Holder, Harris, O’Malley, and other prosecutors to live up to their words.

Update 12/16/2013: Today in the New York Times Adam Liptak has a piece on Federal Judge Jed S. Rakoff’s essay in the New York Review of Books lambasting federal prosecutors for failing to charge even a single prominent figure in the mortgage debacle. As Mr. Lipotak said:

 Judge Rakoff also has no patience with Attorney General Eric H. Holder Jr.’s statement to Congress that some prosecutions should be approached with caution because they may “have a negative impact on the national economy, perhaps even the world economy.”

Judge Rakoff says that “this excuse — sometimes labeled the ‘too big to jail’ excuse — is disturbing, frankly, in what it says about the department’s apparent disregard for equality under the law.”

Prior to 1997 it was easy to learn who owned real property and the identity of those with liens or other interests on a particular property. You could go to the county clerk/recorder’s office and look up the history of a property. All of  the information regarding any real property was public and anyone could research it at a county office. This system was designed to protect the interests of everyone, whether they be the owners, lenders, or potential buyers of real property. For hundreds of years this was a system that worked. Everyone had legal notice of any and all past or present claims, and all of the entities, with potential interests that might cloud the title of a property.

This was a great system when mortgages were owned by the local savings and loan, and securitization of loans was unheard of. If the local bank sold the Note, which was a rare event,  the sale was recorded at the county by filing an assignment of the mortgage or deed of trust. When securitization of mortgages came into play, the old system was seen by Wall Street and others as an obstruction to the process that would slow down the selling of mortgages on the secondary market. Mortgage Electronic Registration Systems (“MERS”) was set up and started operating in 1997 to eliminate any impediment to the process of selling notes and their associated mortgages. Unfortunately, MERS real property records are not public. MERS became the place where some, but not all, property ownership records were kept, not the clerk/recorder’s office for the county in which a property is located. MERS was needed to speed the process that often involved several assignments of the mortgage that often occurred within the first couple of months after the mortgage documents were signed.

Our Note and Deed of Trust might be held by a securitized trust set up by Lehman Brothers Holdings, Inc. (“Lehman”) in 2005. The original “lender” (they were really a front for others), still shown in Alameda County files was Najarian Loans, Inc. The MERS Milestones for our Note show Najarian (n/k/a NL, Inc.) was the original lender and they transferred the servicing and beneficial rights to Bank of America (“BOA”) on May 27, 2005, just 15 days after we signed the loan documents were signed and 10 days after the Deed of Trust was recorded at the county. At the time, the note was actually sold to Countrywide, but because BOA purchased them it is now shown on the MERS Milestones as BOA. If our Note is in the Trust, then it was sold to Lehman on June 30, 2005. There should also have been a transfer to Wells Fargo as trustee of the Trust on June 30, 2005. MERS does not show the transfer to Wells Fargo until September 12, 2012. The point to this being that at a minimum, there might have been  three transfers of the note and deed of trust in the first two months after signing. In the old days this would have required three filings of recorded assignments of the deed of trust: Najarian to Countrywide; Countrywide to Lehman; and Lehman to Wells Fargo.With MERS, the banks, servicers, and lenders save not only on filing fees, but on the preparation of needless, pesky paperwork, like assignments. If we assume a cost of $100 to prepare and record each assignment for each mortgage, and the trust that supposedly owns our mortgage has over 3,000 mortgages, that is a savings to the mortgage industry of around $1 million just related to this one trust, because of MERS.

Jon Stewart recently explained how MERS operates:

Beaufort County, South Carolina recently sued MERS over the problems in the system. “At the end of day,” county attorney Josh Gruber said, “a Beaufort County citizen cannot walk into the Register of Deeds Office and know without a shadow of doubt who owns or services their mortgage.” (See the article here, and the lawsuit here.)

The MERS system leads to the clouding of the title to property. There is an easy fix to this problem. Make MERS records publicly available just as land records have been for centuries. There should be no doubt as to who has an interest in real property. Congress and the states should pass laws requiring MERS data be made available to anyone needing to research the ownership of property.

Force MERS to provide borrowers with the information regarding who owns the note, thereby revealing who should ultimately receive the mortgage payments for their homes. The current situation is absurd. Many borrowers are left with a contract requiring them to pay on a note, but not knowing who they owe the money to.

I am sure the banks and servicers will claim making MERS records public will cause some great harm to the process. Unless the MERS records are publicly accessible, the transparency and accuracy of real property records will remain in question. No one should be left not knowing if there is a cloud on the title to their home.

Imagine a lending system where you can manipulate the system so neither the borrower nor the actual lender know they have been cheated. The perfect setup for a crime, but when nobody goes to jail for the conduct, what’s the danger? If you do not participate as the middle man you are only missing out on profits. Foreclosed borrowers and worthless investments are just collateral damage that do not affect the middle man who has no skin in the game. As soon as the borrowers and the real lenders have signed and paid, the middle man has no more liability, just money in the bank for brokering the deal. Because these “pretender lenders” can sell off their defective loans immediately after origination, the mortgage industry no longer has financial accountability for its conduct.

When we “purchased” our home in 2005, the original lender on the note was Najarian Loans, Inc. (who since changed its name NL, Inc.). Najarian Loans (NL) is also listed as the Lender on the Deed of Trust we signed. At the time, RPM Mortgage, Inc. (RPM) was a wholly owned subsidiary of NL. RPM and NL are apparently owned and operated by the same people: Rob and Tracey Hirt. NL was a correspondent lender for Countrywide, or had another contractual relationship, meaning they had a contract with Countrywide to provide loans of a particular quality. Not until we filed suit did we learn that the note and mortgage might have been purchased by a securitized trust put together by Lehman Brothers Holdings, Inc. (LBHI) called Structured Adjustable Rate Mortgage Loan Trust Mortgage Pass-Through Certificates, Series 2005-15 (Trust). The Standard Underwriting guidelines for the Trust (as detailed in the Prospectus for the Trust) permitted a monthly debt to income ratio based upon the borrower’s total monthly housing expenses (mortgage plus taxes and insurance) of 33%, but they also had expanded guidelines that allowed a maximum of 36%. Any loan that came to the Trust that did not show conformance with these guidelines would be considered defective and the “lender” (like NL) would be obligated to buy the note back from the Trust.

Most likely it was someone in the NL/RPM family who forged and backdated the loan application used to obtain our loan. What we did not know at the time was how the numbers on the loan application were tweaked to make the loan look good to the investors. Just a small tweak up in income, small enough we did not notice when we were shown the loan application after signing the note, combined with understating the monthly property taxes by $100 were all that was needed to make the numbers work. As explained in this earlier post, we still do not know who holds the note; in other words who actually now owns a note that is defective and does not meet the underwriting guidelines. As others have detailed in the past, Countrywide has a well known history with the “Hustle” and other questionable acts.

“Investors,” like the Trust that might have our note, still do not know how many defective loans they purchased. If someone forged, altered and backdated our loan application, then redacted the application presented to us for signing, you can safely assume it happened with other loans. The investors do know how many bad loans they purchased because of the sleight of hand played on both ends of the system. Defective loans like ours, which has not gone into default, help to mask how great the fraud actually was. But some lenders have brought suit over bad loans.

In July 2012 LBHI filed a lawsuit against RPM and NL for selling LBHI defective loans. Among other things the complaint alleges that NL sold LBHI loans that became “Early Payment Defaults.” NL agreed with LBHI to make payments for defective loans, but never made any payments and that led directly to the lawsuit. CitiMortgage previously brought an action in 2009 against the NL/RPM group alleging violations of the agreement between them. The LBHI suit settled in  September 2012, and the CitiMortgage litigation settled in February 2013. Terms of the settlements are not available to the public.

Both lawsuits were based upon obvious flaws in the loans. In the case of the LBHI litigation, the loans in question went into default almost immediately after origination and sale to LBHI. The CitiMortgage lawsuit involved more loans and a demand for more extensive damages. Both of these involve our “lender” but there are many more out there. Just in the last month MBIA and Bank of America settled their longstanding litigation over this issue.

MBIA will not get back all that they lost, but they will be able to continue on in business, barely. There are still thousands of defective loans in the hands of unknowing investors and they do not know it, just as many of the borrowers who took out the loans do not understand how they were manipulated into agreeing to loans that exceeded their capacity to repay.

As this previous post explained, our mortgage servicer, Bank of America has been having a hard time determining just who holds the Note for our mortgage. The answers have been inconsistent and convinced us they do not really know who owns the Note. We just received  a copy of the “Milestones” for our note that was generated by the MERS system.

As the document clearly shows, the Note was sold by Najarian Loans, Inc.(now NL, Inc.) to Bank of America (BAC) on May 27, 2005. At the time it was actually sold to Countrywide and we assume the records were later changed to reflect BAC’s purchase of the rotting corpse of what had been Countrywide.BAC then sold the Note to Lehman Brothers Holdings, Inc. (LBHI) on June 30, 2005. And the final sale was from LBHI to Wells Fargo as Trustee. This information is all consistent with what the MERS system has shown over the years we have been checking.

We filed our lawsuit in February 2012 and named Wells Fargo N.A. (WF) as a party because BAC sent us a letter in October 2011 saying WF was the investor on the Note. BAC, WF, and MERS all demurred together to our complaint on March 22, 2012, and in that demurrer alleged for the first time that the investor on our Note is “Wells Fargo Bank, as trustee on behalf of Structured Adjustable Rate Mortgage Loan Trust Mortgage Pass-Through Certificates, Series 2005-15 (erroneously sued as ‘WELLS FARGO BANK. N.A.’).” After all the different answers we had been provided over the years, we now had another answer. The problem now is that the MERS system did not show Wells Fargo as Trustee as the investor on the Note until September 12, 2012. And BAC is still claiming Wells Fargo Bank, N.A. is the investor. If the investor is Structured Adjustable Rate Mortgage Loan Trust Mortgage Pass-Through Certificates, Series 2005-15, then the MERS system is wrong, because Wells Fargo as Trustee is not the Trust that is the true investor on the Note.

In 2009 Congress passed legislation that included Title 15 United States Code section 1641 (g) requiring that after May 20, 2009 “In addition to other disclosures required by this subchapter, not later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer, including—

(A) the identity, address, telephone number of the new creditor;

(B) the date of transfer;

(C) how to reach an agent or party having authority to act on behalf of the new creditor;

(D) the location of the place where transfer of ownership of the debt is recorded; and

(E) any other relevant information regarding the new creditor.”

We have not received this required disclosure that was generated by the September 2012 transfer of the Note from LBHI to Wells Fargo.

So here we are again, right where we were before. No one knows and no one cares who you owe all that money to.

To finish today, one of the worst examples of what banks can do to a borrower. A Southern California man died in the courtroom while fighting Wells Fargo and now Larry Delassus’ friends and family have sued Wells Fargo for wrongful death. “Wells Fargo placed Delassus into default after the bank incorrectly charged Delassus for back property taxes. Wells Fargo made the mistake after its tax-monitoring subcontractor First American Real Estate Tax Services, otherwise known as CoreLogic, used a wrong assessor’s parcel number to identify Delassus’s home. The parcel number was for the home of Delassus’s neighbor, who had not paid his property taxes. The bank then billed Delassus for more than $13,000 in back taxes after the bank paid the neighbor’s delinquent property taxes.” The full story here.

Tentacles of circumstance describes all too clearly how many home occupants with mortgages feel today (If they were homeowners they would be without a mortgage). They have been caught up by the tentacles of a system that was set up to benefit everyone but them, and many of the tentacles were run by crooks. I recently saw an episode of Law and Order that referred to the “Tentacles of Circumstance.” Research on this line attributes it to President Lyndon Johnson’s father. The biographer Robert Caro wrote:

For Lyndon Johnson was a genius at what his Hill Country populist forebears would have defined as the highest art of government: the art of using the power of the sovereign state to help its people, particularly the least fortunate among them, people who couldn’t help themselves, who were fighting forces too big for them to fight alone. His father, who was a passionately idealistic rural legislator, had a wonderful phrase for it. He said that the duty of government is to help people who are caught in the tentacles of circumstance.

Further on in the piece (it is worth a read), he talks about what people had to do in the Hill country to get water:

Sometimes these women told me something that was so sad I never forgot it. I heard it many times, but I’ll never forget the first woman who said it to me. She was a very old woman who lived on a very remote and isolated ranch–I had to drive hours just to get out there–up in the Hill Country near Burnet. She said, “Do you see how round-shouldered I am?” Well, indeed, I had noticed, without really seeing the significance, that many of these women, who were in their sixties or seventies, were much more stooped and bent than women, even elderly women, in New York. And she said: “I’m round-shouldered from hauling the water. I was round-shouldered like this well before my time, when I was still a young woman. My back got bent from hauling the water, and it got bent while I was still young.” Another woman said to me, “You know, I swore I would never be bent like my mother, and then I got married, and the first time I had to do the wash I knew I was going to look exactly like her by the time I was middle-aged.”

So it has been with the mortgage industry in this country. Millions of hard working Americans trying to reach the dream of home ownership are now bent and round shouldered. The government has offered ineffectual programs to help get the water out of the wells, and meanwhile the swine that created the mess and should be in jail get fatter by the day. Within ten years of being elected to Congress LBJ had brought electricity to the hill country so women would no longer become bent and round shouldered. Five years into an economic meltdown caused by greed and lawlessness, and the government has little to show. None of the real crooks in jail, millions of homeowners still with underwater mortgages, and no clear signal that electricity is on its way to illuminate their world and reduce the burden. People continue to struggle with two buckets of water hanging from a mortgage yoke. How long before the electricity arrives?

The Deed of Trust (DOT) we signed when we purchased our home was prepared by RPM Mortgage, then in Walnut Creek, CA,  on behalf of Najarian Loans (NL) who is the lender on the mortgage note. The DOT is one of those MERS specials, where NL is identified as the lender, but “MERS is a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns. MERS is the beneficiary under this Security Instrument.” I thought the lender was the beneficiary!? No matter. Section 25 of the DOT memorializes the obligation that the “lender may collect a fee not to exceed the maximum amount permitted by Applicable Law for furnishing the statement of obligation as provided by Section 2943 of the Civil Code of California.” Civil Code section 2943 requires “a beneficiary, or his or her authorized agent, shall, within 21 days of the receipt of a written demand by an entitled person or his or her authorized agent, prepare and deliver to the person demanding it a true, correct, and complete copy of the note or other evidence of indebtedness with any modification thereto, and a beneficiary statement.”

So on March 5, 2013 we sent Najarian Loans a letter requesting a beneficiary statement as required by the contact that is the DOT, and State law. We received a somewhat testy response from the attorney for NL and RPM saying

This office is in receipt of your correspondence dated March 5,2013, to Najarian Loans, lnc. in which you request a “Beneficiary Statement.” Additionally, this office is aware that on March 7,2013, you filed a Notice of Appeal regarding the Court’s dismissal of your Complaint against NL Inc. (f/k/a Najarian Loans Inc.), among others. In light of this latest action we must demand that you cease further attempts to contact any of our clients involved in that litigation. Any future requests to our clients are to come to this office in writing.

With regard to your March 5, 2013, request for a ‘Beneficiary Statement,’ we note that pursuant to Cal. Civil Code $ 2943(a)(1), a “Beneficiary” is defined as “a mortgagee or beneficiary of a mortgage or deed of trust, or his or her assignees.” Neither Najarian Loans, Inc. nor RPM Mortgage, Inc. falls under this definition: On May 26,2005, your loan, in its entirety, was assigned/transferred/sold to Countrywide Home Loans, now Bank of America. Therefore, any request for a Beneficiary Statement will need to be made to Bank of America, as our client does not have the information that you request.

While it is correct that we were told the servicing of the Note had been transferred to Countrywide, we never received any notice of who the Note was sold to. Our Declaratory Relief cause of action requests the identity of the current owner of the Note, as designated by proper assignments or allonges. So far all the defendants are adamantly opposed to providing us this information, and continually demurrer to the cause of action claiming there is no reason they should have to prove who owns the Note.

What makes this refusal all the more noteworthy, is that beginning January 1, 2011 new federal regulations (§226.39 of Regulation Z implementing the Truth in Lending Act) requires this exact disclosure whenever a mortgage loan is sold or transferred.

We have a contract (DOT) that says Najarian Loans is responsible for providing a “Beneficiary Statement.” As documented in my previous post, we have tried to determine who owns the Note, and MERS and Bank of America still provide conflicting information. And those who know, claim they should not have to tell us who owns the Note.

It’s tough to fulfill the terms of a contract when you do not know who the contract is with.

Many of those fighting foreclosure have been arguing that no one knows who owns their mortgage note, and they have tried to use this argument as a defense in foreclosure actions. Here in California, the courts have shown this argument no love at all. You owe, you have not paid, end of story. Who owns the mortgage is irrelevant. Unfortunately, in our situation, where we have never missed a mortgage payment, the issue has more complexity. We should be able to contact the note holder and inform them that there was fraud in the origination of the mortgage. So far in our case the court does not care.

Aurora Bank on July 18, 2011

When we obtained the loan in 2005, it was with Najarian Loans located in Alamo, California. Section 8 of the Mortgage Note provides in part “[u]nless the Note Holder requires a different method, any notice that must be given to the Note Holder under this Note must be given by mailing it by first class mail to the Note Holder at the address stated in Section 3(A) above or at a different address if I am given a notice of that different address.” Section 3(A) lists the address for Najarian Loans in Alamo.

The Note was sold by Najarian in 2005 shortly after it was signed to an unknown party, and we were told Countrywide was taking over the servicing. After we filed our lawsuit in February 2012 we learned that the Note might have become part of a securitized trust put together by Lehman Brothers called Structured Adjustable Rate Mortgage Loan Trust Mortgage Pass-Through Certificates, Series 2005-15 (Trust). If the Note was securitized and placed in the Trust, the Trust agreement required that the Note be placed in the Trust no later than June 30, 2005.

Who owns our Note was a bit irrelevant until 2009 when we tried to get refinancing or modification of our mortgage. By this time Bank of America (BAC) had bought out the corrupt floundering carcass of Countrywide and assumed the servicing of our mortgage. Initially, BAC Home Loans Servicing LP, a subsidiary of BAC was the servicer. In 2011 BAC Home Loans Servicing LP was merged back into BAC and they did away with the charade of the separate home loan servicing branch.

In July 2009 I phoned and spoke with the Foreclosure Department of BAC and inquired as to possible modification of the Note. BAC told me that the Note was in review and there would be a response in 60 to 90 days. Having not heard back from BAC, on December 9, 2009, I called BAC and spoke with Kevin Mohrman who stated that BAC currently put a value of $184,000 on the Property, while we still owed almost $350,000 on the Note. The following day I again called BAC and the Default Prevention office informed me that the investor on the Note was Aurora MSF Lehman. I was transferred to Jessica Wedell in the Home Retention office who could not, or would not identify the investor on the Note and reiterated that BAC is only the servicer of the Note, not the investor. After much running around BAC refused to work with us because we were so far underwater. BAC did say we could get a refinance if we put enough cash into the deal to bring the loan amount down to 80 percent of their appraised value, which was definitely a low ball appraisal. This meant to get refinanced, we would have needed to bring about $200,000 cash to the deal and be left with roughly a $150,000 mortgage.

On May 6, 2010 I spoke with Raymond Rinn in Loan Modification at BAC. Mr. Rinn refused to identify the investor on the Note and said BAC would send a modification proposal. As a part of that conversation Mr. Rinn told me that we should not make a payment on the Note for the month of May 2010, and that the May 2010 payment would be rolled into the modification. On May 14, 2010 BAC sent us a proposed Loan Modification Agreement (Modification), including the addition of the May 2010 mortgage payment to the principal on the Note. We had made the May 2010 payment on the Note prior to receiving the proposed Modification because the payment was due by May 15, 2010.  The proposed Modification included the designation of BAC Home Loans Servicing LP as the lender on the Note. The obvious question at this point was how could BAC be the lender on the Modification when they don’t know who owns the Note?

Raymond Rinn from BAC called me on June 3, 2010 and stated that the offer on the Modification had only been open until May 23, 2010, but that they would leave it open until June 3 to allow the opportunity to sign it. I asked Mr. Rinn if BAC was the lender, and again he reiterated that BAC was not the lender but would not explain why BAC was listed as the lender on the proposed Modification. No way we were signing that Modification.

After the wait we tried again and on May 13, 2011 we faxed BAC a letter requesting “the name, address and phone number of the bank or investor that currently owns my mortgage.”

Part of the response BAC sent to us was a copy of the loan history statement for the Note. The loan history show only one “Investor Payment” since the history was started on May 27, 2005. The single “Investor Payment” occurred on June 30, 2005 when the servicing of the Note was transferred to Countrywide, and the investor on the Note was changed to an unknown entity.  We assume the one payment went to either Najarian Loans or Countrywide. This did not explain who had been getting the“Investor Payments” in the following six years.

The Customer Service Department of BAC sent a letter dated June 15, 2011 stating that “the owner of this loan is Aurora MSF Lehman, whose address is 10350 Park Meadows Dr., Littleton, CO 80124. Bank of America services the loan on behalf of the owner.” We were vacationing in Colorado the next month, so on July 18, 2011 I drove to the address in Littleton Colorado where BAC claimed Aurora MSF Lehman was located. The building  holds the offices of Aurora Bank. When I went in and inquired as to the location of the Aurora MSF Lehman offices I was informed they were not at that location and no one there could provide me with the location of the offices. So on July 25, 2011 we faxed a letter to BAC once again asking for the identity of the owner of the Note. The letter explained that I had visited the offices of Aurora Bank in Littleton, Colorado on July 18, 2011 and that Aurora MSF Lehman was not located at that address.

Where is Aurora MSF Lehman?

A Statement of Reservation of Name for Aurora MSF Lehman was filed with the Colorado Secretary of State on August 6, 2011and was registered to Melvin Eugene Olsen in Lindon, Utah. BAC sent a letter on August 17, 2011 saying “the owner of this loan is Aurora MSF Lehman, whose address is 10350 Park Meadows Dr. Littleton, CO 80124. Bank of America services the loan on behalf of the owner.” We followed that with another letter on August 30, 2011 again asking BAC for the identity of the owner of the Note. On September 2, 2011 I spoke by telephone with Customer Service representative “Devin” at BAC who again reiterated that Aurora MSF Lehman was the owner of the Note.

The infamous Mortgage Electronic Registration System (MERS) has a MERS Servicer Identification System that lets a borrower obtain the identity of their mortgage servicer and the investor on the note. The MERS System information available on September 8, 2011 showed the investor on the Note as Lehman Brothers Holdings, Inc. Subsequently, we accessed the online MERS System seven times up to July 6, 2012, and in each case the MERS system showed Lehman Brothers Holdings, Inc. as the investor on the Note.

September 11, 2011 we sent another follow-up letter to BAC again asking BAC “[w]hat is the name, address, and phone number of the bank/note holder/investor/lender” for the mortgage. This letter pointed out that the MERS system showed the investor on the Note as Lehman Brothers Holdings, Inc.

I response the Customer Service Department at BAC sent us a letter dated September 20, 2011 declaring that the investor on the Note was Aurora Bank, 10350 Park Meadows Drive, Littleton, CO 80124.  On September 27, 2011 the MERS system showed the investor as Lehman Brothers Holdings, Inc. which of course was followed by BAC sending us a letter dated September 29, 2011 advising “that the owner of this loan is Aurora MSF Lehman; a Lehman Brothers Co.” The address for Aurora MSF Lehman is identified as 10350 Park Meadows Drive, Littleton, CO 80124.

BAC’s October 7, 2011 letter to us declared that “the owner of the loan is Wells Fargo Bank, NA, whose address is 9062 Old Annapolis Road, Columbia, MD 21045. Bank of America services the loan on behalf of the owner.”

BAC and Wells Fargo each signed a Consent Judgment in April 2012 as part of the National Mortgage Settlement. Exhibit “A” to the Consent Judgment is the “Settlement Term Sheet” that includes BAC’s and Wells Fargo’s commitment to ensure note holders can be identified. Page A-8 of the “Settlement Term Sheet” requires that “[s]ervicer shall implement processes to ensure that Servicer or the foreclosing entity has a documented enforceable interest in the promissory note and mortgage (or deed of trust) under applicable state law, or is otherwise a proper party to the foreclosure action.”

On March 22, 2012 Wells Fargo Bank filed a demurrer in our case alleging that “Wells Fargo Bank, as trustee on behalf of Structured Adjustable Rate Mortgage Loan Trust Mortgage Pass-Through Certificates, Series 2005-15 (erroneously sued as ‘WELLS FARGO BANK. N.A.’)” is the investor on the Note. Wells Fargo was now claiming they did not own the note, but were only the trustee for the Trust.

In July 2012 we sent another letter to BAC asking for the identity of the investor and the July 31, 2012 response identified the Investor as Wells Fargo Bank, N.A., 9062 Old Annapolis Road, Columbia, MD 21045 and a phone number of (443) 367-2897. When we accessed the MERS system shortly after receiving the letter it once again showed the investor on the Note to be Lehman Brothers Holdings, Inc. Finally on September 17, 2012 the MERS system showed the investor on the Note as Wells Fargo as trustee. So after almost three years of trying we still have a disagreement about who owns the Note. Is it Wells Fargo Bank or the Trust? If it is the Trust, BAC has no idea, and it Wells Fargo Bank owns the Note, Wells Fargo does not know it. And if MERS is right that Wells Fargo as trustee is the investor, then the trustee for what trust?

In February 2012 the Office of the San Francisco Assessor-Recorder release a report Foreclosure in California, A Crisis of Compliance that detailed reviews of foreclosures in the County of San Francisco. The report found that “[i]nvestor information was available from the MERS database on 192 of the 382 subject loans. The investigation resulted in 112 loans whereby the beneficiary as entered on the Trustee’s Deed upon Sale conflicted with the investor information present on the MERS database. This is a 58% failure rate.”

The final part of this story comes from the case of Bain v. MERS in the State of Washington, that was heard by the Washington Supreme Court. In the video below, shortly after the 11:00 mark the attorney for Bain explains that after three and a half years they still do not know who owns the note. Following that, around the 22:00 mark the attorney for MERS could not identify the holder of the Note even after being directly asked by one of the justices.

In researching the Trust that might be the note holder for our Note I came across this provision in the Prospectus: “Certain documentation with respect to some Mortgage Loans, including in some cases, the related Mortgage Note, Mortgage or title insurance policy, is unavailable. Except as otherwise noted below, the Seller will make only limited representations and warranties with respect to the Mortgage Loans.” This was not the only securitized trust with this language in its prospectus.

Come on. This means these trusts were buying assets that were not assets. If you do not have the original mortgage note, you have nothing. Where are the government regulators?

In an upcoming post we will explain how BAC could become the lender on the note. As you might expect, it is sleazy.

For those of you that did not see it yet, please take the time to watch the PBS Frontline show entitled The Untouchables that addresses the lack of prosecutions of the key players in the mortgage and financial meltdown. Watch it here.

One of the “stars” of the show is Lanny Breuer, assistant attorney general for the DOJ’s Criminal Division. A recent blog post from former Senator Ted Kaufman, who also appears in the show, discusses Breuer with the following:

“In a speech he gave last fall, the retiring head of the Criminal Division in the Department of Justice, Lanny Breuer, explained that position:

‘To be clear, the decision of whether to indict a corporation, defer prosecution, or decline altogether is not one that I, or anyone in the Criminal Division, take lightly. We are frequently on the receiving end of presentations from defense counsel, CEOs and economists who argue that the collateral consequences of an indictment would be devastating for their client. In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects.’

‘Sometimes – though, let me stress, not always – these presentations are compelling. In reaching every charging decision, we must take into account the effect of an indictment on innocent employees and shareholders, just as we must take into account the nature of the crimes committed and the pervasiveness of the misconduct. I personally feel that it’s my duty to consider whether individual employees with no responsibility for, or knowledge of, misconduct committed by others in the same company are going to lose their livelihood if we indict the corporation. In large multi-national companies, the jobs of tens of thousands of employees can be at stake. And, in some cases, the health of an industry or the markets are a real factor. Those are the kinds of considerations in white collar crime cases that literally keep me up at night, and which must play a role in responsible enforcement.’

From my point of view, this is certainly a novel approach to prosecutorial decision-making.”

We need more Ted Kaufman’s in the U.S. Senate.

Breuer’s evasive answers in the PBS interviews are hard to stomach. In response, the folk at maxkeiser.com produced this video about what Lanny Breuer really meant to say:

UPDATE: Lanny Breuer has gone back to work for a law firm that represents the very people he was supposed to be prosecuting while at the DOJ. The press release announcing his hiring by the law firm he now works for is here.

That’s what an Alameda County Superior Court judge said last month about our lawsuit against  our mortgage brokers and lenders. The judge agrees with the defendants that forging and backdating of a loan application, although it could be a criminal act, and concealing that fact and other information from the borrowers, does not give the borrower recourse in civil court.

This blog will discuss how we got to this point and just how crazy this whole thing is. How the government and the courts claim to care, but if they did we would not be having to fight the way we are to get justice when there was clear fraud. Why would someone forge and backdate your loan application and fail to provide all the required disclosures during the loan process when they were legally required to do so? Because they wanted a fat commission on the sale of the mortgage loan. If they had been honest, the deal would have fallen apart, denying them their fat cut of the action.

As you will see, the mortgage industry was, and still may be, a fat swine, eating borrowers and defecating worthless crap to sell to ignorant investors, getting fatter with each deal. Lehman Brothers, Countrywide and the other purveyors of this excrement knew exactly what they were doing, and still none of them are in jail. After chasing our mortgage story we can tell you the incredible truth that they do not know where your mortgage note resides, and the courts do not care. If there was fraud is was just a normal part of business and no reason for anyone to go to jail.

As our late friend Jane Powell said, “200 years of property law straight down the tubes.”