While the foreclosure crisis might sound to some like duck soup, Professor John E. Campbell from the University of Denver Sturm College of Law has taken the time to dissect the issues in his Mortgage Crisis in a Nutshell video explaining precisely what has happened to homeowners and searching for the reasons why.
Prof. Campbell explains what has happened in the traditional sense and how Mortgage Electronic Registration Systems, Inc. participated in part of the scheme. He also discusses how and why the homeowners were not intentionally at fault.
In this one-hour video, Attorney John E. Campbell explains the main aspects of the mortgage crisis that has devastated the U.S. housing market and the economy. Watch the video and then let’s discuss securitization in a little more detail below.
This video was produced by John Campbell and Erich Vieth, who are both attorneys in St. Louis, Missouri. A substantial part of their law practice concerns issues pertaining to mortgage fraud and unlawful foreclosures. They have filed numerous individual and class action lawsuits on behalf of behalf of homeowners.
This video is divided into the following sections:
I. The Big Picture and its Many Parts (:55)
II. Banks Flood the Market with Subprime Mortgages (3:54)
- III. Banks, Securitize their Mortgages (10:05)
- IV. Banks Cry for a Bailout (13:57)
- V. Wall Street Malfeasance (16:54)
- VI. Foreclosures, Robo-Signing, Trustees and Conflicts of Interest (18:20)
- VII. MERS (“Mortgage Electronic Registration System) (33:45)
- VIII. The Mortgage System Used to Work (43:42)
- IX. Credits and Further Readings (52:43)
It is their intent to offer a video for both lawyers and non-lawyers that presents an overall picture of an area of law that has, especially over the past decade, become intimidating in its complexity. More than all of us even realize…
If you follow DeadlyClear you know that the banking industry has patented every aspect of this mortgage fiasco – taking it away from the traditional lending into a “new” invention. The patents are filed in the USTPO as if to make this appear more legitimate.
Reading the patents, however, allows for a retrospective examination into the new terminology blended in among the traditional mortgage loan forms without definition. For example, if you want to know the purpose of Mortgage Electronic Registration Systems, Inc. (which the banks never thought you’d access) search the USTPO – but do it on Google Patents because the search is more accessible (Click here).
Now don’t laugh when you read the name of one of the securitization patents filed in 1999 and published in 2004: Method and system for facilitating opportunistic transactions using auto-probes. (Click here for PDF). An attorney commented it sounded like vaginal examination equipment (maybe that was on purpose). This patent has been referenced in other patents by such esteemed patent inventors as Fannie Mae, Bank of America, Goldman Sachs, Morgan Stanley, HOME Mortgage Card… just to name a few.
A descriptive passage from the patent states:
“Loans sold on the secondary markets are often bundled and securitized. Securitization is the repackaging of
non-negotiable securities [mortgage loans] into negotiable securities [certificates] (e.g., issuing securities [certificates] against future cash flows such as mortgage backed securities).” [Emphasis and clarification added]
It appears that the intention of mortgage-backed securitization was to make the homeowner loans static or passive instruments which would make the notes, for example, relatively “non-negotiable” (as noted above) because they could no longer be sold or traded if they were assigned to a REMIC (tax shelter) trust.
That makes sense – but the homeowners didn’t bargain for a “non-negotiable instrument” just like they didn’t explicitly agree to electronic transfer (UETA) of their mortgage loan documents. Homeowners were still under the impression they were dealing with a traditional mortgage loan – Oh Ha! Guess what – surprise! Welcome to the new world of mortgage lending through fraud and deceit.
Since the notes were stripped into pieces and could no longer be thrown on a poker table and treated as negotiable while they were in a REMIC trust, the banks had figured a way to make these passive non-negotiable instruments negotiable – by using the “auto-probe” patent. Voila! The securities that the banks issued against the future revenue stream of the notes are called “certificates” which are negotiable and can be traded while the original mortgage loan note is supposed to be safely housed in a vault or with a custodian until the loan is paid off or refinanced.
The auto-probe patent states:
“Buying and selling of mortgage notes takes place on the secondary mortgage market among sophisticated investors such as commercial banks, insurance companies, governmental agencies, savings and loans institutions, Wall Street firms and other high volume mortgagees. Unlike the primary mortgage market, secondary market investors do not necessarily service loans purchased and they do not collect monies owed directly from the borrowers.”
Let’s just say this – the homeowners had no idea that they were dealing with the “secondary” market as opposed to the traditional primary market and they certainly didn’t know that the process may have materially altered their note while it was in securitization. They just knew that it has been damn hard to get a modification – like going to the moon, right Alice?!
If Prof. Campbell’s video inspires you learn more about the mortgage industry, including bank misconduct, securitization and foreclosures, you are invited to explore the websites of these three excellent organizations:
Center for Responsible Lending http://www.responsiblelending.org/(start with the “Mortgage Lending” tab on the home page.
National Consumer Law Center. http://www.nclc.org/
National Association of Consumer Advocates. http://www.nclc.org/
Wikipedia also offers many articles to get you started, including the following:
For an especially good explanation of MERS (“Mortgage Electronic Registration Systems, Inc.”), see “Two Faces: Demystifying the Mortgage Electronic Registration System’s Land Title Theory,” (2011) by Law Professor Christopher Peterson and ShellGame-MERS by Robert Janes.
Thank you Deontos and Deb – and the foreclosure defense team for their research and assistance.