Federal Regulators Sue Big Banks Over Mortgages

By NELSON D. SCHWARTZ and KEVIN ROOSE

Published: September 2, 2011

A bruising legal fight pitting the country’s most powerful banks against the full force of the United States government began Friday, as federal regulators filed suits against 17 financial institutions that sold the mortgage giants Fannie Mae and Freddie Mac nearly $200 billion in mortgage-backed securities that later soured.

The suits are the latest legal salvo fired at the banks accusing them of misdeeds during the housing boom. Investors fled financial shares Friday amid growing concern that the litigation could last for years and undermine earnings and balance sheets in the process.[CONTINUE READING on NY Times]
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By DEADLY CLEAR

Here is a copy of the FHA Complaint – hot off the press!

Have you read the New York Attorney General’s Petition to Intervene in conjunction with the Trusts as he is explaining the defaults and deficiencies?  Take a look at this sample of a  Pooling and Servicing Agreement (click here) and read section 7.01.  If I am interpreting it correctly – this is precisely why there is liquidation / foreclosure.

Reading the Petition along with the Allstate v. Countrywide lawsuit, it appears that since the loans didn’t get timely assigned to the Trusts that the Master Servicer must agree to be replaced by a receiver and the Trust liquidated – at the NIM insurer’s direction…

So, because Countrywide committed fraud there is no other option and the Certificateholders’ PSA requires that the Trust be dismantled and liquidated.

Schneiderman points to this as the reason for the collapse of the economy. With that said… doesn’t this set the stage that the fraud caused the collapse, the borrower was duped  and defrauded, his collateral mishandled, title clouded, foreclosure botched and deserving of damages in excess of his mortgage?

Your honor – PLEASE consider these TOP TEN DEADLY CLEAR documented points and rule in favor of the homeowner:

1.  Allstate has claimed that the prospectuses contained untrue statements and omissions of material facts, in violation of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “1933 Act”); Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 (the “1934 Act”); and common-law fraud and negligent misrepresentation.
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2. Allstate’s Complaint alleges that beginning in 2003, Countrywide systematically began to abandon the underwriting guidelines and falsifying data as part of a top-down corporate policy of the mortgages it touted.  Allstate further cites cases where numerous courts have sustained allegations of “systemic underwriting abandonment”.
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3. Allstate further alleges that the facts found in Countrywide’s own materials and testimony, are supplemented by, among other things: (1) statements of former employees and customers describing how borrowers were steered into low or no-documentation products as to enable income misrepresentations and confirming that Countrywide knew appraisals were being inflated in order to get loans approved; (2) Countrywide fed baseless loan statistics to the national credit rating agencies that rated the Trusts, essentially pre-determining the ratings that would be given. The use of baseless statistics also made representations being designed to assess credit risk false, as the entire ratings process was rigged from the start through the use of incorrect data.
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4. Recently, New York Attorney General Eric Schneiderman asked a state judge, In the Matter of the Application of The Bank of New York Mellon to reject a proposed $8.5 billion settlement agreement over soured loans between Bank of America and a group of investors, claiming in court documents that a separate bank representing the investors committed fraud for failing to ensure that the mortgage securities were created in accordance with state law and for failing to act in the investors’ best interest.
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5. New York Attorney General Eric T. Schneiderman stated that BNYM Was Aware Of the Trusts’ Failure To Transfer Loans.  BNYM, the trustee representing the investors, “knowingly, repeatedly, and consistently” misled investors into thinking that the mortgage bonds were created properly.
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6. Not only did the originator of the loan, Countrywide, conspire to systematically abandon the underwriting guidelines, inflate the appraisals, apparently the Trustee, Defendant BNYM, effectively looked the other way, which “apparently triggered widespread fraud,” Schneiderman said in court documents.
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7. One of BNYM’s primary obligations as trustee under these PSAs was to ensure the proper transfer of loans from Countrywide to the Trusts.
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8. The ultimate “failure of Countrywide to transfer complete mortgage loan documentation to the Trusts” hampered the Trusts’ ability to foreclose on delinquent mortgages, thereby impairing the value of the notes secured by those mortgages was stated in Schneiderman’s pleading.
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9. The failure to properly transfer possession of complete mortgage files has hindered numerous foreclosure proceedings and resulted in fraudulent activities including, for example, “robo-signing.” These fraudulent activities have burdened borrowers as well as the courts with flawed foreclosure proceedings.
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10. “BNYM knew the scope of the loan documentation deficiencies because it issued detailed exception reports for the Trusts. These deficiencies impaired the value of the securities by compromising the collateral and imposing additional servicing costs.”

Don’t let the FHA make a mockery out of the courts. This could set the precedent to usurp the judicial and due process nature of our system. Tell your Congressional Representatives and Senators, “No” – “No, lawsuits against the banks unless its for criminal prosecution. Don’t waste anymore of our taxpayers money just to let the criminals off the hook.”